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Risque's    Bookkeepin, 


and 


Business    Management 


A  complete  guide  to  modern  practice  written  so  any 
one  may  understand  it  and  with  70  forms  filled 
in  to  show  how  the  actual  entries  are  made.  Tells 
how  to  select  a  set  of  books  to  fit  any  business 
and  explains  how  to  open  them,  make  all  necessary 
entries,  and  close  them.  The  reasons  why  are 
given  in  all  cases.  Good  for  individuals,  part- 
nerships, or  corporations.  Gives  special  attention 
to  financial  statements  for  creditors,  trade  accept- 
ances, mercantile  agency  work,  stock  and  pur- 
chase records,  cost  and  price  books,  want  books,  etc. 


BY 


F.   W.    RISQUE 


NEW  YORK 

U.  P.  C.  BOOK  COMPANY,  INC. 

243-249  West  39th  Street 


7 


#<r 


COPYRIGHT.    1922. 

BY 

U.  P.  C.  BOOK  COMPANY,  IXC. 


Foreword 


THE  average  retail  merchant  with  his  many  duties,  especially  the 
buying  and  selling  of  his  merchandise,  is  very  apt  to  overlook  the 
importance  of  keeping  proper  books  of  account,  without  which  it 
is  impossible  for  him  to  know  with  any  degree  of  certainty  his  financial 
condition. 

The  present  regulations,  and  those  that  will  probably  follow  by  the 
government,  will  make  it  necessary  for  every  merchant  to  keep  his  books 
in  proper  form,  not  only  to  be  prepared  to  make  correct  reports  to  the 
government,  but  also  to  figure  up  his  own  taxes,  etc. 

If  a  merchant  keeps  the  proper  books  he  should  be  able  at  all  times  to 
know  the  amount  of  his  purchases,  consequently  avoid  overtrading  and 
thereby  running  into  debt.  He  would  also  have  brought  to  his  notice  the 
accumulation  of  old  stock  on  his  shelves,  which  should  be  converted  into 
money  before  the  goods  are  completely  out  of  date  or  useless.  The  proper 
way  to  figure  on  the  selling  price  of  merchandise  is  explained  in  detail  in 
this  book,  and  should  be  familiar  to  every  merchant. 

There  is  an  old  saying  that  goods  well  bought  are  half  sold,  and  it 
might  be  added  that  if  the  proper  selling  price  is  put  on  the  goods  it  will 
insure  a  reasonable  profit  on  the  transaction,  and  without  this  profit  no 
business  can  be  successful. 

Mr.  Risque  has  shown  in  a  very  convincing  way  just  how  the  best 
results  may  be  obtained  by  the  retail  merchant  in  the  all-important  matter 
of  keeping  proper  books  of  account.  I  am  hopeful  that  this  book  will  be 
in  the  hands  of  a  large  number  of  retail  merchants,  as  I  am  sure  if  they  are 
guided  by  the  rules  laid 
down  by  the  Author 
they  will  meet  with  a 
full  measure  of  success 
in  their  business. 

Feb.,  1920. 


3 


Preface 


Several  years  ago,  a  few  public-spirited  business  men  met  in  one  of 
our  large  eastern  cities  to  discuss  plans  for  more  uniform  practices  and 
better  methods  in  general  business. 

Among  the  questions  discussed  was  the  indifference  to  any  proper 
system  of  bookkeeping  by  so  many  of  the  smaller,  and  in  some  cases,  by 
even  the  more  important  concerns. 

These  gentlemen  stated  that  their  own  long  and  varied  experience 
confirmed  the  published  statistics  showing  the  high  percentage  of  failures 
due  directly  to  that  cause. 

It  was  proposed  to  formulate  a  simple  and  short  —  though  complete 
system  as  applicable  for  suggestion  in  such  cases,  which  might  remedy  this, 
and  a  request  was  made  to  prepare  it.  After  due  consideration  of  the 
varying  businesses  and  the  capital  employed,  it  was  decided  that  no  one 
such  plan  would  suit  all. 

A  short  time  ago  another  request  came  from  one  of  our  most  prominent 
trade  journals  of  almost  the  identical  scope,  but  like  the  former  was  regret- 
fully declined. 

During  a  long  and  tedious  convalescence  of  the  past  months,  that 
same  question  kept  recurring  and  demanding  solution,  and  was  only 
stilled  by  laying  out  the  following  programme: 

"  A  "  Prepare  a  sound  foundation  of  elementary  examples  in  simple 
and  perhaps  homely  language,  that  would  suit  the  least  experi- 
enced, these  to  then  be  put  in  proper  form  on  the  pages  of  a 
small  set  of  books ; 

"  B  "    Prepare  a  succeeding  and  more  advanced  set; 

"  C  "  Using  the  same  transactions  as  set  "  B,"  with  same  persons, 
same  goods  and  amounts,  arranged  in  a  set  to  suit  a  business 
with  several  departments,  exemplifying  Department  Books. 

The  main  idea  was  to  make  the  steps  simple,  easy  and  gradual,  from 
the  opening  of  the  first  set  to  the  close  of  the  last,  with  explanations  of  the 
why  and  the  how. 

The  transactions  of  sets  2  and  3  are  shown  in  diary  form,  pages  76 
and  117  to  82  and  124,  which  are  then  entered  up  in  detail  on  the  Cash 


6  PREFACE 

Book,  Sales  Book,  Journal,  etc.,  etc.,  and  posted  to  the  several  ledger 
accounts,  just  as  is  done  by  a  bookkeeper. 

These  forms  or  books  (Figs.)  are  all  shown,  Set  1  — after  page    26, 

"   2—     "        "       89, 

"   3  —     "        "     125, 

and  a  list  or  index  of  them  for  quick  reference  is  on  pages  at  the  back. 

The  cross-index  of  subjects  is  arranged  with  the  same  object  in  view 
as  that  of  our  well-known  Missouri  coon  trap  —  to  catch  the  subjects 
coming  and  going. 

The  system  outlined  may  be  adapted  to  any  other  mercantile  or  to  a 
manufacturing  business,  with  such  slight  changes  as  may  be  necessary  to 
suit  its  nature  or  the  conditions. 

Some  principles  in  Dicksee's  Auditing,  American  Edition,  edited  by 
Robert  11.  Montgomery,  and  definitions  in  Pittman's  Dictionary  of  Book- 
keeping by  R.  J.  Porters  have  been  so  well  and  clearly  expressed  that  they 
have  been  quoted,  as  shown  by  the  foot  notes. 

How  well  the  plan,  which  we  hope  may  meet  his  commendation,  has 
been  worked  out  must  be  determined  by  each  reader. 

F.  W.  R. 

St.  Louis,  1922. 


Contents 


CHAPTER    I                                                         pAGE 
Simple    Accounting    for    Retail    Stores 9 

CHAPTER    II 
Books   IS 

CHATTER    III 
Commencing  Business   24 

CHATTER    IV 
Closing  Books  for  Month.     Set  1 30 

CHATTER    V 
Closing  Books  for  Year.     Set  1 39 

CHATTER    VI 
Debit  and  Credit  in  Another  Light 45 

CHATTER    VII 
Inventory    48 

CHATTER    VIII 
Percentage,  figuring  cost  and  selling  price 56 

CHATTER    IX 
Books  of  Set  2 63 

CHATTER   X 
Tartnership    °7 

CHATTER    XI 
Robert  Bell  &  Co.'s  Books.     Set  2 75 

CHATTER    XII 
Closing   Entries    °6 

CHATTER    XIII 

Set  2,  organized  into  departments  as  Set  3.     General  Accounts,  only,  changed 107 

7 


8  CONTEXTS 

CHAPTER   XIV                                                   Page 
Both  Sets  Have  Same  Customers 116 

CHAPTER    XV 
Closing  Books  for  the  Month.     Set  3 136 

CHAPTER    XVI 
Closing  for  the  Year.     Set  3 138 

CHAPTER    XVII 
Bank  Account  1-16 

CHAPTER   Will 
Corporations    149 

CHAPTER    XIX 
Financial  Statements  for  Creditors 155 

CHAPTER   XX 

Mercantile  Agencies  159 

CHAPTER    XXI 
Insurance    160 

CHAPTER    XXII 
Trade  Acceptances   163 

CHAPTER    XXIII 
Stock  Record  to  Show  Purchases,  Sales  and  Stock  on  Hand 168 

CHAPTER    XXIV 
House  Cost  and  Price  Book 172 

CHAPTER   XXV 
Want  Book,  or  Memorandum  of  Goods  Xeedcd 174 

CHAPTER   XXVI 
Miscellaneous    176 

Glossary    179 

Index  to  Forms  187 

Cross  Index   188 


LIST  OK  FIGURES  WITH  NAMES  AND  SET  OE  BOOKS    TO  WHICH  THEY  BELONG 


Fig. 

Sri 

Page 

Name 

Fig. 

Set 

Page 

i 

13 

Contents  of  Boxes 

29C 

2 

102 

2A 

16 

Ledger  Regular  Ruling 

29D 

2 

102 

2B 

16 

Ledger  Balance  Columns 

3° 

109 

3A 

17 

Sales  Ticket 

30A 

112 

3B 

19 

Order  Blank 

30B 

"3 

4 

I 

21 

Sales  Book 

31A,    B, 

3 

ii7to 

5 

25 

Rubber  Stamp 

C,  D,  E, 

124 

6 

I 

31 

Cash  Book 

F,  G,  H, 

Inc. 

?A 

I 

34 

Journal 

32A 

3 

125 

7B 

34 

Journal  Divided 

32B 

3 

126 

7C 

2-3 

34 

Journal  Entry 

3i 

3 

127 

8A 

I 

35 

General  Ledger  Accts. 

34 

3 

129 

SB 

I 

36 

Ledger  Accts.  Payable 

35 

3 

128 

SC 

I 

36 

Ledger  Accts.  Receivable 

36 

3 

128 

9 

I 

37 

Trial  Balance 

37 

3 

129 

IO 

I 

38 

Journal  Closing  Entries 

38A 

3 

130 

ii 

I 

38 

Ledger  Accts.  After  Closing 

38B 

3 

131 

12 

I 

40 

Balance  Sheet 

39 

3 

135 

13 

I 

44 

Closing  Mdse.  Account 

41A 

3 

132 

14 

2 

50 

Inventory  Blank 

41B 

3 

133 

15 

61 

Relative  Percentage  Between 

41C 

3 

i34 

Selling  and  Purchase  Price 

42 

3 

135 

16A-B 

2 

61 

Sales  by  Days  and  Months 

43 

3 

140 

17A 

69 

Credit  Memorandum 

44 

3 

141 

17B 

70 

Purchase  Order 

I7C 

3 

72 

Petty  Cash  Ticket 

45 

3 

142 

18A,   B, 

2 

76-82 

Robert  Bell's  Co.'s  Diary 

C.  D,  E, 

Inc. 

46 

3 

144 

F.G 

48 

3 

143 

iq 

2 

89 

Trial  Balance  to  Begin 

49 

3 

145 

20 

2 

90 

Journal  Entries 

5° 

3 

145 

21 

2 

92 

Cash  Book  Entries  Receipts 

52 

3 

147 

22 

2 

93 

Cash  Book  Entries  Paid  Out 

53A-B 

158 

.    23 

2 

91 

Sales  Book  Entries 

54 

165 

-'4 

2 

94 

Ledger  General  Accts. 

55 

74- 

25 

2 

95 

Ledger  Accts.  Payable 

165 

26A 

2 

96 

Ledger  Accts.,  Customers 

56A 

168 

26B 

2 

97 

Ledger  Accts.,  Customers 

56B 

171 

27 

2 

98 

Trial  Bal.  Before  Closing 

57 

173 

28 

2 

99 

Journal  Closing  Entries 

58 

151 

29A 

2 

100 

Ledger  Genl.  Accts.  after  clos- 
ing 

59 
60 

152 
152 

29B 

2 

101 

Ledger  Genl.  Accts.  after  clos- 
ing 

Name 


Ledger  Accounts  Payable 

Balance  Sheet  End  of  Year 

Voucher 

Check 

Back  of  Check 

Robert  Bell's  Co.'s  Diary 


Trial  Balance  to  Begin 
Cash  Book  Receipts 
Cash  Book  Payments 
Journal  Entries 
Sales  Book  Entries 
Sales  by  Department 
Sales  by  Salesmen 
Voucher  Record,  Left  Hand 
Voucher  Record,  Right  Hand 
Pay  Roll  by  Department 
General  Ledger  Accts. 
General  Ledger  Accts. 
General  Ledger  Accts. 
Trial  Balance  Before  Closing 
Journal  Closing  Entries 
Ledger    Gen'l.    Accts.    After 

Closing 
Ledger    Gen'l.    Accts.    After 

Closing 
Trading  Acct.  Ledger  144 
Ledger  Acct.  After  Closing 
Ledger  Acct.  After  Closing 
Balance  Sheet  End  of  Year 
Check  Book  Stubs 
Samples  Financial  Statement 
Trade  Acceptance 

Bill  Book 

Mdse.  Stock  Book 

Mdse.  Stock  Book 

Price  Book 

Cash  Book,  Firm  to  Corp'n. 

Cash  Book,  Firm  to  Corp'n. 

Ledger  Acct.  Capital  Stock 


ERRATA 

P.    32,  1 8th  and  19th  line  transposed. 

P.     64,  3rd  line.     "A  &  B"  should  be  eliminated. 

P.    64,  4th  line.     Page  74  should  read  Page  94. 

P.     70,  3rd  line.     257  should  read  25. 

P.     74,  4th  line  duplicated  in  line  5. 

P.     74,  4th  line.     Fig.  170  should  read  Fig.  55. 

P.     74,  5th  line  should  be  eliminated. 

P.     75,  15th  line.     Delete  (Figs.  18A  to  iSG). 

P.     75,  15th  line.     Change  16  to  76. 

P.    87,  bottom  line.     Change  96  to  99. 

P.  136,  5th  line.     Page  93  should  read  126. 

P.  136,  7th  line.     Page  93  should  read  126. 

P.  136,  24th  line.     Fig.  28  should  read  38A. 

P.  156,  13th  line.     Change  45  to  37. 

P.  188,  22nd  line.     Change  "  receiver  "  to  read  "  receive. 


CHAPTER    I 

Simple  Accounting  for  Retail  Stores 

DO  you  know  how  much  you  owe  and  how  much  you  have,  with 
which  to  pay  it  ? 
Can  you  tell  how  much  you  have  made,  and  what  branch  of 
your  business  is  profitable?     Or,  if  any  department  is  losing  money,  and 
if  so,  which? 

Could  you  make  an  intelligent  report  to  your  bank,  or  a  Mercantile 
Agency  ? 

If  you  can  do  all  these,  to  your  satisfaction,  you  may  not  wish  to 
read  this,  but,  if  you  have  no  system,  and  rely  largely  upon  your  memory 
for  details,  as  so  many  do,  you  must  not  be  surprised  that  an  examination 
will  disclose  many  leaks;  many  debts  due  you,  overlooked  or  forgotten, 
petty  losses  which  would  surprise  you,  and  explain  restricted  growth  of 
your  business  —  all  for  want  of  a  simple,  clear,  common-sense  method, 
which  anyone  with  ordinary  ability  can  master. 

Investigate  the  Question 

Is  the  question  worth  investigating,  before  deciding  that  the  old 
method  is  good  enough,  and  that  you  do  need  light,  further  light,  and  more 
light,  upon  how  the  successful  merchant  is  able  so  easily  to  manage  his 
large  and  growing  business? 

Where  to  commence  is  always  a  difficult  question,  but,  to  start  at  the 
bottom  and  take  for  granted  that  many  know  nothing  about  bookkeeping, 
though  you  might  find  much  of  it  an  old,  old  story,  is  but  fair. 

Some  years  ago,  the  writer  had  a  class  in  bookkeeping,  at  one  of  our 
settlement  houses  where  all  service  is  gratuitous —  the  scholars  —  mechan- 
ics, apprentices,  sons  and  daughters  of  small  shopkeepers,  all  without  even 
an  elementary  knowledge  of  the  subject,  yet  at  the  close  of  the  winter's 
course,  of  one  evening  a  week,  over  ninety  per  cent,  had  been  able  to  carry 
on  business  on  paper  and  show  me  a  correct  balance  sheet. 

This  statement  is  made  simply  to  give  hope  to  even  the  most  discour- 
aged reader,  and  as  the  beginning  was  very  elementary  with  them,  so  it  will 
be  with  you,  and  the  only  apology  necessary  for  our  more  advanced  read- 


10         BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

ers  is  that  we  must  begin  somewhere,  and,  if  they  wish,  they  can  skip  the 
balance  of  this  section,  which  uses  very  homely  examples. 

Debit  and  Credit 
Let  us  try  a  very  simple  experiment,  in  theory  only. 

The  Game 

Suppose  we  take  a  number  of  small  boxes,  say  cigar  boxes  without 
tops,  put  a  partition  in  the  center  of  every  box  so  that  each  will  have  two 
compartments,  and  mark  with  chalk  Dr.  (abbreviated 'for  debit)  on  all 
left-hand  compartments  or  sides,  and  Cr.  (abbreviated  for  credit)  on  all 
right-hand  sides. 

Tack  these  boxes  to  three  sides  of  the  room  —  one  group  for  customers 
who  buy  from  you,  one  for  jobbers  or  dealers  from  whom  you  buy,  and  one 
for  general  or  other  accounts. 

Label  these  boxes  as  explained  hereafter,  just  as  a  bookkeeper  would 
head  the  different  pages  of  his  ledger. 

We  will,  for  convenience,  call  you  John  Wilson,  and  with  this  imagi- 
nary outfit,  and  a  few  slips  of  blank  paper,  you  can  play  the  game. 

You  have  SI, (100. 00  cash  to  begin  with,  have  chosen  your  location, 
and  ordered  your  opening  stock. 

Debit  and  Credit 

First,  label  one  box  "  CASH  " — make  out  a  slip,  say,  li  Received 
$1,000.00  cash  from  John  Wilson,"  and  put  this  slip)  in  the  debit  side  of 
that  box,  as  all  slips  placed  in  the  debit  side  of  this  box  show  amounts  due 
you  by  this  box,  call  it  Mr.  Cashier,  or,  Cash,  and  any  slips  in  the  Credit 
side  would  be  due  you  for  money  paid  out. 

You  debit  or  charge  to  anyone  or  to  any  account,  what  you  pay  out,  or 
part  with,  and,  Credit  to  anyone  or  any  account  the  amount  paid  to,  or 
received  by  you. 

You  had  $1,000.00  and  put  it  in  the  business,  or  Cash  drawer,  or 
bank,  to  be  used  for  the  business,  hence,  as  you  paid  it  to  the  concern,  Cash 
account  owes  it  to  you,  John  Wilson,  and  cash  is  debited  with  it. 

You  label  another  box  "  John  Wilson  "  and  make  out  a  slip  "  Paid 
in  $l,00().ou  "  and  put  that  slip  in  the  Credit  side  of  box  John  Wilson. 

This  stands  Cash  owes  $1,000.00  and  John  Wilson  has  $1,000.00 
Credit  or  due  him  by  the  store. 

You  have  put  up  shelves  which  cost  $20.00,  bought  scales  for  $10.00, 
and  office  furniture,  desks,  chairs,  etc.,  $20.00,  and  paid  for  same  out  of 
the  cash. 


SIMPLE  ACCOUNTING  FOR  RETAIL  STORES  11 

As  these  are  under  the  head  of  "  Furniture  and  Fixtures,"  you  label 
one  box  with  that  title,  and  put  in  these  bills,  or,  make  out  slips  as  follows: 

Paid  cash  for  shelves $20 .  00 

"       "     "    scales 10 .  00 

"     "    office  furniture 20 .  00 

and  put  in  the  Debit  side  as  you  gave  them  to  the  business. 

Make  out  slips  similarly  and  put  these  copies  in  the  Credit  side  of 
box  labeled  "  Cash,"  because  you  have  received  the  total  $50.00  cash  for 
these  three  bills,  and  paid  out  to  the  parties  from  whom  you  received  the 
articles,  hence  credit  cash. 

Why  is  a  Memo  Kept  of  Cash  Paid? 

You  could  have  taken  out  of  the  cash  box  the  $50.00,  and  paid  for 
these,  without  noting  the  fact,  and  your  balance  of  $950.00  would  be  in  the 
cash  box,  but,  later  you  could  not  trace  up  where  the  cash  went,  though  you 
could  by  following  the  plan  outlined. 

If  your  rent  is  payable  monthly,  in  advance,  you  pay  your  landlord, 
say,  $30.00  for  one  month's  rent,  ending  Oct.  31st,  and  put  his  receipted 
bill,  or  a  slip,  in  the  Debit  side  of  Expense  box,  and  a  similar  slip  in  the 
Credit  side  of  Cash,  because  you  received  the  cash  and  paid  it  out  for 
expense. 

John  Brown  was  engaged  as  clerk  at  $9.00  per  week,  and  at  the  end 
of  the  first  week  he  is  paid  his  salary,  and  slips  made  out  "  paid  Brown 
wages  for  week  ending  Oct.  7th,  $9.00." 

One  is  put  in  the  Credit  side  of  Cash,  for  you  received  that  amount 
from  the  Cash  box,  and  the  copy  is  put  in  the  Debit  side  of  Expense  box, 
for  you  paid  it  for  wages  which,  for  the  present,  we  call  expense. 

Merchandise  Different  from  Sales 

For  convenience,  we  call  goods  bought  and  expenses  of  putting  them 
in  the  store,  Merchandise  —  some  use  the  term  "  Stock,"  some  the  term 
"  Purchases,"  and,  any  part  sold,  we  call  "  Sales,"  as  it  keeps  the  two 
accounts  well  defined,  and,  in  large  houses,  serves  many  purposes  for 
calculation. 

Receiving  Goods 

The  goods  bought  begin  to  arrive,  are  checked  off  and  so  noted  on 
the  bill  of  the  jobber,  after  they  have  been  compared  with  memo  of  sale 
left  with  you  by  the  traveling  salesmen,  and  when  found  correct,  they  are 
ready  for  the  boxes. 


100.50, 

.. 

••     4 

545.00, 

(I 

-      2 

250.00, 

.. 

"     3 

95.00, 

.. 

••     3 

12         BOOKKEEPING  AND   BUSINESS  MANAGEMENT 

These  invoices  or  bills  are  then  placed  in  the  Credit  side  of  boxes 
labeled  each  for  its  particular  house,  as  follows : 

Invoice  Oct.  1.  National  Hardware  Company,  $59.50,  received  Oct.  4 

"      2.  (ark-ton  Dry  Goods  Co., 

"         "1,  Goddard  Grocery  Company, 

"1.  Brown  Shoe  Company, 

"•      2,  Gauss  Hat  Company, 

and  >lips  of  same  put  in  Debit  side  of  Merchandise  box. 

For  you  received  these  goods  from  these  dealers,  consequently,  they 
should  be  credited  with  them, —  you  delivered  the  goods  to  stock,  or, 
Merchandise,  hence,  merchandise  owes,  or  must  be  debited  with  these 
amounts. 

Freight  Charged  to  Merchandise  Account 

Freight  is  paid  on  these  shipments  amounting  to  $15.00.  Slips  made 
out  "'  Freight  on  goods  "  ( specifying  particulars  >  and  placed  in  Debit  side 
of  merchandise  for  that  is  an  additional  amount  given  for  merchandise, 
and  copy  of  this  slip  put  in  Credit  side  of  Cash,  for  you  received  from  Cash 
box  the  money  to  pay  for  freight,  hence  credit  Cash. 

Personal  Expenses 

You  used  money  for  household,  or,  personal  expenses,  then  make  out 
a  ticket  "  Oct.  4  received  cash  on  account  John  Wilson,  $20.00.''  Place 
a  copy  of  this  in  the  Credit  side  of  Cash,  because  you  received  it  from  the 
cash  box  and  place  the  other  ticket  in  the  Debit  side  of  the  box  "John 
Wilson,"  because  $20.00  was  paid  John  Wilson. 

Cash  Sales 

The  money  received  from  Cash  Sales  amounting  to  $252.50  was  in 
slips  put  in  the  cash  drawer  each  night,  and  slips  for  the  same  amount  put 
in  Debit  side  of  Cash,  because  this  amount  was  given  Cash  box  and  as  that 
sum  received  from  sales  slips  or  tickets  for  that  amount,  are  put  in  Credit 
side  of  Sales  box. 

Goods  Sold  on  Credit 

Goods  are  sold  on  credit,  or,  open  account,  as  listed  below,  and  a  slip 
for  each  bill  is  put  in  Debit  side  of  the  proper  account,  say: 

Wm.  Cox,        sold  and  delivered  goods,  10/5,  $87.50 
Geo.  Allen,       "       "  "  "       10/5,     48.80 

Frank  Welsh,    "       "  "  "       10/6,     74.00 

Henry  Moore,   "       "  "  "       10/6,     67.20 

because  the  goods  were  given  or  delivered  to  these  customers,  and  similar 


SIMPLE  ACCOUNTING  FOR  RETAIL  STORES 


13 


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Fig.  1 — Trial  Balance 


slips  placed  in  the  Credit  side  of  box  labeled  "  Sales,"  because  Sales  gave 
up  the  goods. 

If  you  examined  the  boxes,  you  would  find  them  to  contain  slips,  in 
some  cases,  in  both  Debit  and  Credit  compartments,  and,  by  subtracting 


14         BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

the  smaller  amounts  from  the  larger,  in  each  box,  you  see  the  balance,  and 
whether  it  is  a  credit  (due  by  you)  or  a  debit  (due  to  you). 

Trial  Balance 
Let  us  see  how  the  boxes  stand:      (Fig.  1.) 

Accounts  Payable 

We  group  bills  owing  by  the  store  and  unpaid,  which  in  this  case  are 
for  purchases  from  jobbers,  under  the  head  "Accounts  Payable."     And, 

Accounts  Receivable 

Bills  due  the  store  and  unpaid,  which  in  this  case  are  for  goods  sold 
customers  under  the  heading,  "Accounts  Receivable." 

Questions 

It  may  be  advisable,  after  reading  the  foregoing,  and  without  again 
referring  to  the  text  for  answers,  to  write  out  your  understanding,  or  replies 
to  the  following: 

If  you  received  money,  or,  other  property,  would  you  debit  or  credit 
the  person,  or,  account  from  whom  received?     Why? 

If  you  pay  money,  or  turn  over  other  property  to  or  for  any  one,  would 
you  debit  or  credit  that  account  ?     Why  ? 

If  you  receive  goods  from  another,  why  put  the  amount  in  Merchan- 
dise account,  and,  is  it  a  debit  or  credit? 

If  you  turn  over,  deliver,  or  sell  goods  to  another,  why  put  the  amount 
in  sulc.-.  account,  and,  is  it  a  debit  or  credit? 

What  account  do  you  use  for  goods  sold? 

What  account  for  goods  bought? 

Why  do  we  charge  cash  paid  to  one  of  the  clerks,  or,  to  John  Wilson 
as  head  of  the  business? 

Why  do  we  credit  Cash  with  amounts  paid  out  ? 

In  the  next  chapter  we  will  discard  the  boxes  and  enter  the  same 
transactions  in  proper  books  of  account,  describing  the  functions  and  rela- 
tion of  each  book  to  the  others  in  the  set. 

Later,  through  gradual  steps  we  may  arrive  at  a  comprehensive  and 
detailed  svstem,  suitable  for  a  more  extensive  business. 


CHAPTER    II 

Books  Required 

WE  will  now  discard  the  boxes  described  in  the  preceding  chap- 
ter, replacing  them  with  a  ledger. 
Instead  of  using  slips  for  each  transaction,  to  be  listed, 
and  added,  later,  the  entries  are  written  each  on  its  special  ledger  page, 
which  is  ruled  to  suit  that  purpose. 

Heavy  lines  divide  the  ruling  for  debit  entries,  on  the  left,  from  the 
ruling  for  credit  entries  on  the  right  side  of  the  page. 

The  debit  amounts  being,  one  under  another,  in  each  account,  in  one 
column,  are  added  or  footed  in  pencil,  the  credits  likewise,  which  shows 
at  a  glance  totals  of  each  side  of  an  account. 

The  balance  can  be  easily  and  simply  found  by  deducting  the  smaller 
from  the  larger  amounts  and  placing  this  difference  in  the  proper  "  bal- 
ance "  column,  as  the  following  ledger  account  of  Wm.  Cox: 
Which  shows,  that, 

You  sold  Cox  a  bill  on  Oct.  5th  of  $87.50,  posted  from  Sales  Book, 
page  3,  to  Debit  of  his  account  in  ledger. 

He  paid  cash  on  account  Oct.  9th  of  $50.00,  posted  from  Cash  Book, 
page  1,  to  Credit  of  his  account  in  ledger. 

Leaving  a  balance,  unpaid,  of  $37.50  as  shown  in  the  "Debit  Bal- 
ance "  column. 

The  ordinary  ledger  has  no  columns  for  balance,  and,  when  used,  the 
debit  and  credit  columns  are  added  in  pencil,  and  the  balance  figured  put 
in  pencil  inside  the  space  to  the  left  of  the  amount  column. 

Before  describing  the  books  in  which  you  make  the  original  entries, 
it  may  be  well  to  describe  the  ledger,  its  functions,  and  uses. 

Ledger 

The  ledger  is  ruled  with  heavy  lines,  down  the  center  of  the  page,  and 
ruling  for  debit  entries,  or  charges,  on  the  left-hand  part  of  page,  and  for 
credit  entries  on  the  right-hand  part,  and,  sometimes  has  two  columns,  one 
each  side  for  debit  or  credit  balance. 

The  usual  headings,  if  printed,  are  as  (Fig.  2A). 

15 


16 


BOOKKEEPING   AND   BUSINESS  MANAGEMENT 


Opening  an  Account 

Thus,  if  \\'m.  Cox  bought  a  bill  of  goods  on  Oct.  5th,  $87.50,  his 
first  bill  from  you,  you  open  the  ledger  in  space  reserved  for  customers, 
head  the  page  with  his  name  and  address,  and,  on  debit  side,  write  in  the 
proper  columns  —  date  of  bill,  description  of  sale,  to  show  that  the  charge 
or  debit  is  for  goods  bought,  and  the  page  of  the  sales  book  from  which 
you  take  your  figure-,  and  amount  of  bill. 

Spacing   the    Ledger 

It  is  usual  to  reserve  first  30  pa  a  small  ledger  for  general  or 

representative  accounts,  such  as  Merchandise,  Sales,  Cash,  Expense,  the 
persona]  accounl  of  the  proprietor,  or,  partner-,  etc. 


NAME 

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Fig.  2A  —  Usual  Form  Ledger  Ruling 


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Fig.  2B 


Accounts  Payable 

The  next  30  or  40  pages  for  "Accounts  Payable"  or,  firms  from 
whom  you  buy,  and,  styled  so,  because  we  usually  owe  these  firms  for 
goods  bought;  hence,  they  must  be  paid,  or,  are  payable,  being  creditors. 

Accounts   Receivable 

The  other  pages,  back  of  Accounts  Payable  or  Creditors'  space,  we 
reserve  for  customer-'  accounts,  and,  when  we  refer  to  this  1  lass  of  accounts 
we  say:  "Accounts  Receivable,"  because  they  owe  us,  and  we  expect  some 
day  to  receive  the  several  amounts  owing  by  them.  They  are  also  styled 
"  Debtor-.' 

The  books  for  keeping  the  accounts,  say,  of  a  business  having  a 
capital  of  SI  ,0011. no,  may  be  very  simple,  and  the  classifii  ation  of  expenses 


BOOKS  REQUIRED 


17 


be  dispensed  with,  though  should  any  particular  class  of  expense  need 
investigation,  the  items  could  easily  be  picked  out  from  the  cash  book,  and 
lists  made  for  comparison. 

Let  us  presume  that  you,  Air.  John  Wilson,  pay  all  minor  expenses 
promptly;  that  purchases  of  stock  are  paid  for  at  maturity  of  those  bills, 
and,  also,  that  your  sales,  both  for  Cash  and  Credit,  or,  open  account,  are 
properly  recorded. 

Cash  Sales 

You  may  use  a  "  Cash  Register  "  to  record  Cash  Sales,  in  which  event 
you  count  the  contents  of  the  register  drawer,  and,  after  deducting  the 
amount  on  hand  to  start  the  day  with, 
compare  cash  with  the  record  of  the 
register. 

Sales  Tickets 

If  you  use  sales  tickets,  each  clerk  is 
supplied  with  his  particular  pad,  having 
his  number  on  each  ticket,  for  identifica- 
tion. These  tickets  are  in  duplicate  for 
carbon  copies.  When  sale  is  made,  he 
itemizes  the  articles,  prices  and  amounts, 
and  if  deemed  best,  the  name  and  address 
of  purchaser,  also  noting  on  the  ticket  the 
amount  received,  if  not  agreeing  with  the 
sum  of  the  sale,  that  there  be  no  misunder- 
standing when  change  is  returned ;  he  puts 
amount  received  in  the  Cash  Drawer, 
hands  customer  the  carbon  copy  with  the 
purchase,   and  places  the  original  ticket 

either  in  a  special  compartment  of  the  Cash  Drawer,  or  some  other  safe 
place  agreed  upon. 

Counting  Cash 

At  close  of  business  these  tickets  are  listed  and  totaled,  and  cash  in 
drawer  counted,  to  check  agreement  with  amount  sold.  The  amount  of 
dav's  cash  sales  is  then  entered  on  Cash  Book. 


A.'  . 
Add 

/'    '      .. ..  _..      .     . 

Ml  CUimi  Mu»l  be  M.de  IMMEDIATELY  upon  Receipt  of  Corrfl 

below  is  vouo  account  stated  vo  date 

. .:  _  l  ••  1 

FQH*AHO 

1 

i 

3 

4 

5 

fi 

7 

a 

9 

[0 

M 

12 

i3 

14 

15 

27 

16 

SAVE  THIS  SLIP         IT  13  YOUR  ONLY  RECORD. 

Fig.  3A  —  Sales  Ticket 


Unbusinesslike  Cash  Drawer 

A  very  unbusinesslike  method  which  is  so  often  carried  out,  is  to  have 
a  general  cash  drawer  to  which  every  one  in  the  house  has  access,  to  deposit 
cash  for  sales  made,  make  change  for  any  customer,  or,  stranger  who 


18  BOOKKEEPING   AND    BUSINESS  .MANAGEMENT 

requests  it,  possibly  to  pay  out  express  or  other  petty  charges,  or  even  for 
farm  produce  such  as  eggs,  butter,  etc.,  without  putting  in  any  memoran- 
dum, on  the  theory  that  what  remains  in  the  drawer  is  not  larger  than 
would  be  there,  even  if  a  ticket  for  every  item  had  been  made  out  and 
put  in. 

The  first  two  plans  arc  both  good,  but  the  last,  customary  for  so 
many  generations,  should  not  be  allowed.  It  permits  no  check  on  errors 
in  making  change,  nor  checking  what  the  balance  amount  should  be.  but 
rather  undermines  habit  of  accuracy,  make-  it  impossible  to  fix  responsi- 
bility in  any  particular  quarter,  and  places  temptation  in  the  path  of  every 
clerk. 

Cash  Book 

Every  cent  received,  or  paid  out,  should  be  accounted  for  and 
explained. 

Mr.    Cash 

The  Cash  Book,  which  is  the  record  of  the  Cash  Account,  is  treated  on 
the  books  as  if  it  were  a  person  ( say  Mr.  ( lash,  or  the  Cashier),  and,  as  all 
cash  received,  is  turned  over  to  Mr.  Cash,  he  must  be  debited  with  the 
amount,  for  he  owes  it  to  the  store  until  repaid.     (  Fig.  6,  page  31.) 

Similarly,  as  all  cash  paid  nut  is  taken  from  Mr.  Cash,  or  the  Cash 
drawer,  he,  Cash,  must  be  credited  with  those  >ums. 

Credit  From  Whom  Received — Debit  To  Whom  Paid 

As  you  may  remember,  always  en  dit  the  per.-on  or  account  from  whom 
you  receive  any  money,  or  other  property;  likewise,  you  debit  or  charge  the 
account  or  person  to  whom  you  deliver  any  money  or  other  property,  and, 
as  the  cash  book  is  the  record  of  money  disbursed  by,  or  received  from  the 
cashier  I  Cash  )  the  amount-  must  be  credited  or  debited  that  account. 

Cash  Book 

As  the  Cash  Book  shows  what  the  Cashier  has  received  and  been 
debited  with,  it  also  shows  from  whom,  or  what  account  he  received  it,  and 
each  person  or  account  giving,  or  paying,  the  partcular  sums,  must  have 
credit  for  the  same;  also,  when  Cashier  pays  out  any  sum  lie  should  be 
credited  with  it  and  the  account  or  person  to  whom  paid  should  be  debited. 

Receipts 

The  receipts,  or  cash  received,  entered  on  the  left-hand  page  of  Cash 
Book,  are  either  from  "  Cash  Sale-,"  or,  sales  which  at  the  time  are  paid; 
—  from  "Customers,"  or,  payments  for  goods  previously  bought  anil 
charged  to  their  account; 


BOOKS  REQUIRED 


19 


—  from  "  Sundries,"  or,  some  other  source,  than  the  two  mentioned 
above,  which  in  this  set  of  books  we  will  term  "  Sundries." 

Disbursements 
The  Disbursements,  or,  cash  paid  out,  entered  on  the  credit  or  right- 
hand  page  of  Cash  Book,  are: 

for  Merchandise,  or  goods  purchased  for  cash,  and  freight  on  same; 

for  Expense,  or  wages,  rent,  light,  heat,  taxes,  insurance,  etc.,  etc., 
which  in  a  small  business  may  all  be  grouped  in  one  account  called 
"  Expense,"  and  if  at  any  time  you  need  to  inquire  into  any  particular 
class  of  this  account,  the  amounts  or  particulars  can  easily  be  picked 
out  a«d  listed; 

for  Sundries ;  or  payment  of  cash  to  or  for  any  person  or  account  other 
than  the  two  previously  mentioned. 

Journal.    (See  Fig  7A,  page  34.) 

The  Journal  is  used  for  those  entries  which  cannot  properly  be  made 
in  either  the  Cash  Book,  or  Sales  Book,  the  latter  sometimes  called  "  Sales 
Journal."  The  ruling  of  the  Journal  is  very  similar  to  the  ordinary  Day 
Book  in  general  use. 

In  this  set  of  books,  we  enter  in  the  Journal,  the  purchases  of  goods 
bought  to  be  paid  for  by  us  later,  so  we  can  post  to  the  credit  of  those  firms 
from  whom  we  have  bought,  the  proper  amount  due  them,  and,  charge  the 
corresponding  amounts  to  "  Merchandise." 

Order  Blank 
When  a  charge  customer,  or  one  who  buys  now,  but  expects  to  pay 


OA  KVIllE    . 

Mr 

Bought  of    TchnHiL^ON 

19.  .  . 

SAlllMAH  .  -  .  .  .    . 
sex)  By 

TERMS 

:»«<«  .»  GENERAL  MERCHANDISE 

Ql/AKTjTV 

A  n  T  1    etc   s 

PITlCf 

AMOUNT 

U*    -           -* — - — ^____          ^^/ 

Fig.  3B  —  Order  Blank 

some  time  later,  is  sold,  you  take  a  block  of  order  blanks,  always  using  a 
carbon  under  the  first  sheet. 

There  are  many  excellent  forms,  but  a  simple  one  is  here  suggested: 


20         BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

Making  Out  Sales  Tickets 

Plainly  write  the  customer's  name  and  address,  and  your  name  or 
initials  in  space  for  "  Salesmen;  "  list  the  articles  bought,  and  quantity,  put 
in  prices,  make  extension  and  foot  the  amount,  get  particulars  of  how  and 
where  delivery  is  to  be  made,  and  then  send  to  office  the  two  copies  for 
approval  of  credit.  When  approved,  have  the  goods  gotten  out,  check  items 
on  bill  as  wrapped,  and  send  goods  with  carbon  copy  to  proper  address,  for- 
warding original  copy  to  the  office  for  entry  in  Sales  Book. 

If  preferred,  you  can  use  your  regular  Cash  Sales  ticket  or  check 
(Fig.  3 A,  page  17),  which  you  have  for  Cash  Sales,  by  writing  across 
the  top  "  CHARGE,"  to  distinguish  from  Cash  Sales,  though  a  separate 
and  distinctive  form  is  usually  preferred.     (Fig.  3B.) 

When  a  charge  sale  —  or  sale  of  goods  which  is  to  be  paid  for  at  a 
future  date,  is  made,  some  merchants  use  one  of  the  Cash  Sales  tickets  for 
describing  the  sale  and  file  this  ticket  to  come  up  for  attention  or  collection 
later. 

Some  use  a  case  with  subdivisions  or  pigeon-holes  lettered  from  A  to  Z, 
others  use  a  pouch  or  box-file  with  lettered  compartments. 

These  charge  sale  tickets  are  each  placed  in  its  proper  compartment, 
all  A's  in  the  A  space,  B,  C,  D,  etc.,  also  in  their  compartments,  each  hav- 
ing the  first  letter  of  the  respective  customer's  surname.  All  the  tickets  of 
any  one  may  be  found,  together  with  all  tickets  of  other  customers  having 
names  beginning  with  that  letter  or  initial. 

At  the  end  of  the  month  the  tickets  of  each  customer  are  arranged  in 
the  order  of  date  bought  and  on  the  back  of  the  last  ticket,  listed  by  date 
and  amount  and  the  total  then  added. 

When  all  are  so  totaled  they  are  listed  in  an  ordinary  Day-book  and 
these  amounts  totaled,  showing  the  amount  of  all  charge  sales.  The 
amount  of  each  customer  is  posted  to  his  debit  in  his  ledger  account  and  the 
total  of  all  of  these  bills  credited  to  Merchandise  or  Sales  Account. 

There  are  many  variations  of  this  system,  each  advocated  by  the  man- 
ufacturer of  sales  tickets,  who  advises  his  own  special  method.  Several 
large  concerns  have  introduced  a  system  using,  for  each  charge  customer, 
one  block  or  set  of  tickets  —  beginning  each  with  any  balance  owing  by 
the  several  customers,  and  furnish  a  case  of  pigeon-holes,  one  for  each 
customer  or  with  lettered  compartments  —  one  for  each  letter  of  the 
alphabet. 

When  a  customer  buys  (see  Fig.  3 A,  page  17),  he  sees  on  the  first 
line  of  his  ticket  the  balance,  if  any,  he  now  owes  and  to  this  amount  is 
added  the  sale  just  made,  the  total  being  amount  unpaid  to  date. 


BOOKS  REQUIRED 


21 


The  original  ticket  is  handed  the  customer,  the  duplicate  remaining 
in  the  book  or  pad. 

This  new  total  is  then  carried  to  the  first  line  of  the  next  set  of  blanks 
or  tickets,  ready  to  be  added  to  the  next  bill  bought,  as  a  total. 

If  the  cash  is  paid  on  account,  it  is  noted  on  the  ticket  and  deducted 
from  the  unpaid  total  and  a  new  balance  brought  down.  Thus  you  have 
at  all  times  the  balance  or  amount  due  by  each  customer  and  the  customer 
also  sees  on  each  ticket  of  purchase  the  amount  owing  to  and  including 
that  date.  At  the  end  of  the  month  the  total  amount  of  goods  bought  by 
each  customer  as  shown  by  the  tickets  is  charged  the  respective  customers 
and  the  total  of  all  their  sales  credited  Merchandise  or  Sales. 

The  cash  as  paid  having  been  credited  the  customers  on  the  cash  book 
and  duly  posted  to  their  ledger  accounts,  the  total  of  all  customers'  slips  will 
agree  with  the  total  of  all  customers'  ledger  balances. 


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Fig.  4  —  Sales  Book 

Some  of  the  smaller  merchants,  using  the  last  system,  keep  no  ledger 
accounts  with  customers  and  depend  entirely  on  these  tickets  to  show  all 
balances  unpaid. 

As  a  business  grows  it  may  be  found  much  more  satisfactory  to  use  a 
regular  Sales  Book,  and  when  so  desired  the  change  can  at  any  time  be 
easily  made  without  disturbing  the  other  part  of  your  system. 

The  final  listing  of  dates,  amounts  and  names  above  must  be  made 
and  require  no  more  time  or  work  to  enter  in  a  Sales  Book  than  as  above 
and  have  not  the  permanence  or  satisfaction  that  is  furnished  by  a  Sales 
Book  —  hence  many  prefer  the  Sales  Book. 


Sales  Book 

The  Sales  Book  used  exclusively  to  record  sales  made,  may  be  an 
ordinary,  but  wide,  Day  Book,  easily  procurable  in  your  neighborhood. 

The  Sales  Book,  sometimes  called  a  "  Sales  Journal,"  may  be  headed 
as  shown.     (Fig.  4.) 


22         BOOKKEEPING  AND  BUSINESS  MANAGEMENT 
Orders  to  be  O.K.'d  Before  Filing.     (Fig.  3A,  page  17  or  3B,  page  19.) 

The  orders  (for  goods  sold),  shipped  or  delivered,  are  sent  to  the 
office,  and  there  having  previously  been  approved  or  O.  K.'d  as  to  credit, 
are  examined  and  checked  as  to  price,  extension  and  footing,  and  then 
entered  in  the  Sales  Book,  giving  particulars  in  the  columns  as  per  printed 
or  written  headings. 

These  Sales  Entries  are  then  ready  to  be  posted  or  written  up  in  the 
ledger  as  follow-: 

Posting 

On  the  debit  or  left-hand  side  of  the  ledger  page  of  this  particular 
customer's  account  (for  example,  Geo.  Allen);  you  enter  the  date  of  sale 
or  charge,  the  page  number  of  the  sales  book  from  which  you  post,  the 
description  "  Sales  "  which  shows  it  is  Merchandise  sold,  and  in  the  Debit 
amount  column  the  amount  of  the  sale  or  bill.     (  Fig.  SC.) 

All  the  other  bills  are  also  to  be  posted  to  their  respective  accounts  in 
the  ledger,  and  at  the  close  of  day  the  amount  column  of  the  Sales  Hook 
added  in  pencil. 

Sales   Book   Footings   Carried   Forward 

These  pencil  footings  of  Sales  Book  are  to  be  carried  forward,  or 
sales  added  the  following  day,  including  the  pencil  footings  of  previous 
day,  so  that  the  last  pencil  footing  will  show  the  total  of  the  sales  entered 
in  the  Sales  Book  up  to  that  point,  and,  at  the  end  of  the  month  the  footings 
are  made  in  ink  showing  the  total  credit  sales  for  the  month.     (Fig.  4.) 

Sales  Total  Posted 

The  last  ink  footing  is  posted  in  the  ledger  (Fig.  8A,  page  35  ),  to 
the  Credit  of  sales,  because  as  sales  has  given  these  several  amounts  to  the 
persons  named,  consequently,  sales  must  be  credited,  and  as  the  persons 
receiving  the  goods  have  been  duly  charged,  and  the  final  amount  credited 
sales,  you  have  accounted  for  both  the  giver  and  receiver. 

Sales  Different  Account  From  Merchandise 

Formerly,  bookkeepers  used  only  one  account  called  Merchandise,  to 
which  they  charged  all  purchases  and  which  they  credited  with  all  sales, 
and  at  any  time  the  balance  was  figured  it  was  necessary  to  separate  the 
debits  and  credits  and  make  deductions  or  additions  to  arrive  at  either  the 
total  purchases,  or  total  sales,  but  by  having  two  accounts,  one  Merchan- 
dise, or  Purchases,  and  the  other,  Sales,  we  can  at  any  time  tell  amounts  of 


BOOKS  REQUIRED  23 

each  for  any  period,  how  much  the  purchases  have  amounted  to,  or  the 
sales,  for  any  one  or  more  months  or  years. 

At  the  end  of  month  you  foot  the  cash  sales  (column  E,  Fig.  6, 
page  31)  in  the  Cash  Book,  crediting  this  total,  $292.50,  to  sales  account 
in  the  ledger  (Fig.  8A,  page  35),  which  with  the  total  sales,  $277.50, 
■  from  sales  book  (Fig.  4,  page  21)  shows  total  sales  both  charge  and  cash 
sales  for  the  month  $570.00. 


CHAPTER    III 

Commencing  Business 

SOME  time  last  September,  old  Mr.  Wilson's  Estate  was  settled. 
His  son,  John  Wilson,  inherited  his  share  of  the  estate  and  deter- 
mined to  profit  by  his  8  years  experience  as  an  employe  of  the 
Clark  Mercantile  Co.,  one  of  the  largest  general  merchandise  establish- 
ments in  his  section. 

Wilson  had  been  through  all  the  positions  of  minor  clerk,  floor 
salesman  in  several  departments,  assistant  buyer  and,  in  busy  seasons, 
spent  many  a  long  evening  willingly  helping  the  bookkeeper  in  writing 
up  accounts,  making  out  monthly  bills  or  overdue  statements  and,  in 
addition  to  his  practical  experience  in  the  stock,  gradually  gained  a 
knowledge  of  general  office  work.  He  found  a  good  location  and  soon 
closed  the  lease,  beginning  Oct.  1st.  He  hired  Brown  as  general  clerk, 
at  $9.00  per  week;  attended  to  the  altering  of  the  shelves,  bought  a  second- 
hand, but  good  scale,  and  suitable  office  furniture  from  a  local  dealer. 

An  opening  stock  was  ordered  from  those  traveling  salesmen  he  had 
known  for  several  years,  as  very  reliable  men. 

Putting  in  Capital 

October  1st  he  deposited  $1000.00  in  the  bank,  the  amount  he  thought 
sufficient  at  least  for  the  present  venture,  and  made  an  entry  on  the  debit 
side  of  the  Cash  Book  (Fig.  6,  line  2,  column  G,  page  31),  crediting 
himself  with  $1000.00. 

Posting 

He  opened  the  ledger  at  page  1,  headed  the  account  "  John  Wilson," 
entered  date,  page  number  of  cash  book,  wrote  cash  received,  and  amount 
(Fig.  8A,  page  35),  and  then  marked  in  space  for  ledger  folio,  in  the 
cash  book  opposite  the  entry  —  the  page  number  of  ledger  on  which  he 
had  made  the  entry  or  posting,  so  that  the  entry  in  the  cash  book  showed 
page  on  which  he  had  entered  it  in  ledger,  and  the  ledger  entry  showed 
page  of  cash  book  from  which  it  had  been  taken  or  posted. 

This  enables  any  one  to  check  the  entries,  if  ever  required  to  be  done. 

24 


COMMENCING  BUSINESS  25 

Buying  Furniture 

He  then  paid  Hart,  the  carpenter,  for  putting  in  new  and  changing 

old  shelves  — $20.00 

paid  for  the  scale 10.00 

paid  for  a  desk  and  chairs 20.00 

These  amounts  were  paid  from  cash  in  the  drawer  and  at  once 
entered  on  the  credit  side  of  Cash  book  (Fig.  6,  line  2,  page  31),  in  Sun- 
dry column  P,  as  the  charge  was  not  to  merchandise  nor  expense,  but  an 
account  which  occasionally  occurred,  or  Sundries,  therefore  put  in  that 
column. 

The  rest  of  the  day  was  spent  in  straightening  up  and  preparing  for 
reception  and  care  of  expected  stock. 

Let  Wilson  tell  the  story  — 

Receiving  Goods 

Oct.  2nd  —  In  the  forenoon,  goods  bought  from  the  National  Hard- 
ware Company  were  received  and  checked  by  count,  weight  and  description 
by  Brown,  the  recently  hired  clerk,  priced  and  marked  by  me,  and  goods 
put  on  the  shelves. 

The  bill  was  marked  correct  as  to  terms,  prices  and  extension, 
having  been  compared  with  duplicate  order  or  memo  left  by  salesman  at 
time  they  were  bought. 

The  form  used  as  shown  below,  was  stamped  on  each  bill  as  soon 
as  taken  from  mail,  and  when  goods  are  received  the  space  for  name  and 

Impression  by  rubber  stamp. 


Prices  &  Terms  O.  K. 

Extensions  O.  K. 

Condition  &  Weight  O.  K. 

Date  Rec'd Via 

Req'n  No Fgt.  $ 

Charge 


Fig.  5 


initial  are  filled  in  if  correct  or  notation  made  and  dated  on  bill,  if  any 
discrepancies,  say  shorts,  unsatisfactory  substitution,  damaged  articles, 
etc.,  and  promptly  taken  up  with  shipper  or  railroad. 

I  had  learned  long  years  ago  that  an  immediate  claim  had  a  delayed 
one  beaten  100  per  cent  in  time,  friction,  proof  and  temper. 


26         BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

When  goods  check  with  bill  and  the  initials  are  written  in, 
the  bill  is  ready  to  be  entered  to  credit  of  shipper. 

This  bill  is  entered  in  the  Journal  (Fig.  7 A,  page  34)  crediting 
National  Hdw.  Co.  Inv.  10/1  $59.50  —  charging  "  Merchandise  "  (same 
amount)  — $59.50. 

Turning  to  section  reserved  for  creditors  or  Accounts  Payable, 
(firms  from  whom  we  buy),  say  between  pages  30  and  60,  we  use  page 
58,  head  the  page  National  Hdw.  Co.,  and  on  first  line  of  credit  or  right 
hand  side  post  the  amount  ($59.50  —  Fig.  8B,  page  36). 

Then  in  space  of  Journal  "  Led.  Fol."  write  58  —  page  number  of 
the  ledger  to  which  you  have  just  posted  the  entry. 

Indexing 

You  have,  of  course,  found  out  that  the  ledger  lias  an  index  in  the 
front  on  which  you  always  either  write  the  name  of  person  or  account, 
and  the  ledger  page  number,  as  soon  as  you  have  selected  the  page  you 
are  to  use,  or  immediately  after  heading  the  page,  and  thus  will  always 
avoid  delay  and  annoyance  of  failing  to  index  an  account. 

I  have  known  many  to  suffer  who  followed  no  rule  in  this  procedure, 
and  as  a  result,  sometimes  wholly  neglected  to  index  an  account  which 
caused  delay  when  quick  reference  was  required. 

Oct.  3rd  —  The  goods  ordered  from  Goddard  Grocery  Company,  and 
Brown  Shoe  Company,  are  delivered  and  we  pursue  the  >ame  course  as  with 
goods  from  National  Hardware  Company,  checking  goods,  price,  exten- 
sions, and  initialing  in  the  rubber  stamp  impression  spaces  (Fig.  5)  and 
note  exception,  if  any.  The  bills  proving  correct,  we  enter  up, 
crediting  "  Goddard  Gro.  Co.,  Inv.  10/1,"  $545.00 
"  Brown  Shoe  Co.,     Inv.  10/1,"  250.00 

charging  Merchandise $795.00.     (See  Fig.  7A.) 

Oct.  4th.      (Sunday.) 

Oct.  5th.     Received  goods  shipped  by 
and  credited 

Carlton  Dry  Goods  Co.,  Inv.  10/2 $100.  50 

Gau>s-Langenburg  Hat  Co.,  Inv.  10/2 95.00 

charged  Merchandise $195.50.   (Fig.  7A.) 


Freight  Paid 

The  same  day  the  R.  R.  Agent  presented  freight  bills  for  freight  on 
goods  delivered  2nd,  3rd,  and  5th, 


COMMENCING  BUSINESS  27 

On  National  Hdw.  Co.'s  shipment,     $1.78 
Goddard's  "  6.17 

Brown's  "  3.72 

Carleton's  "  1.53 

Gauss'  "  1.80 

Which  we  pay  and  charge  to 

Merchandise $15.00.     See   Cash   Book    (Fig.   6, 

line  3,  column  N,  page  31). 

The  cost  of  goods  is  the  invoice  price,  together  with  any  charges  for 
freight  or  delivery,  or  the  total  amount  paid  for  the  goods  bought  and  laid 
down  in  the  store,  hence,  as  the  freight  is  part  of  that  cost,  it  is  charged,  in 
a  small  business,  directly  to  Merchandise.  In  larger  houses  freight  paid 
on  goods  bought  is  charged  "  Freight  in  "  and  freight  prepaid  on  sales  sold 
delivered  is  charged  "  Freight  out."  "  Freight  in  "  is  charged  finally  to 
Merchandise  or  Stock,  and  "  Freight  out"  is  charged  finally  to  Sales. 

Rent 

The  landlord  calls  to  see  if  we  can  spare  the  money  for  October  rent, 
$30.00,  which  we  pay,  take  his  receipt,  and  charge  to  Expense.  (See  Cash 
Book,  column  O,  Fig.  6,  page  31.) 

Our  announcements  and  visits  have  been  working  for  we  have  been 
busy  showing  goods  to  some  of  the  most  valued  of  my  old  customers  who 
had  favored  me  while  in  my  former  place  of  employment. 

Our  stock  was  fresh,  our  efforts  to  please  were  keyed  up  to  that  feeling 
way  back  in  my  head. 

"  You-cannot-afford-to-let-up!-you-must-succeed-Hammer! 

"Hammer !  -but-do-it-on-the-soft-pedal-and-WIN !  " 

We  won ;  at  least>  started  to  winning. 

George  Allen  came  in  just  to  look  around  and  see  how  we  were  fixed, 
didn't  need  any  goods,  etc. —  you  are  familiar  with  such  accidental  calls, 
but  I  succeeded  in  booking  his  order. 

While  I  was  busy  with  Allen,  Brown,  my  clerk,  was  busy  chatting 
with  Wm.  Cox,  and  seemingly  relying  upon  his  radiant  smiles  to  draw  out 
the  order  I  knew  he  was  after. 

At  first  it  struck  me  as  a  pink  tea  gossip  between  two  old,  but  gracious, 
hens,  and  I  had  a  notion  that  I  had  better  hurry  over  as  soon  as  I  was 
through  with  Allen,  but  I  recalled  the  advice  I  had  overheard  old  Mr. 
Clark  give  his  new  son-in-law  just  taken  into  the  concern: 

"  Don't  disturb  a  probable  pending  sale  by  butting  in;  the  customer's 
mind  will  be  confused  and  he  will  then  require  careful  leading  to  bring 
him  back  to  the  bridge  he  was  about  to  cross;  the  salesman  cannot  but 


28         BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

realize  the  implication  of  superiority  on  your  part,  with  the  result,  that  he 
will  be  rattled  and  the  interruption  end  in  a  '  near-sale.'  ' 

The  momentary  desire  to  help  Brown  died  when  my  memory  turned 
back  to  those  words  of  the  squarest,  whitest,  most  successful  boss  a  man 
ever  had  served  under. 

A  short  time  later  I  had  gone  to  the  office  to  look  up  some  prices ;  Brown 
came  in  smiling  and  handed  me  the  order  he  had  written  up  for  Cox. 

The  goods  were  quickly  gotten  ready,  packed  and  orders  entered  up  on 
Sales  Book.     (Fig.  4,  page  21.) 

Charging  Geo.  Allen,  $48.80 

Wm.  Cox,  87.50 


And   Merchandise  will  be  credited  $136.30,  by  posting  total  at  end  of 

month. 
Customers'  Accounts 

Accounts  were  to  be  opened  in  that  part  of  the  ledger  reserved  for  cus- 
tomers, any  page  between  80  and  the  back  cover,  but  I  had  learned  that  if 
the  customers'  accounts  had  220  pages  at  our  disposal,  I  would  allot  a 
certain  number  of  pages  to  each  letter. 

I  selected  page  82  for  Geo.  Allen,  indexed  his  account,  turned  to  page 
82,  headed  the  page  with  his  name  and  address,  and  then  posted  from  the 
Sales  Book,  date,  sales,  salesman's  name,  page  of  sales  book  from  which 
entry  was  taken,  and  last  the  amount,  $48.80.  (See  ledger  account,  Fig. 
8C,  and  sales  book,  Fig.  4,  page  21.) 

We  allotted  page  96  to  Wm.  Cox,  indexed  the  page,  turned  to  page  96, 
and  posted  the  entry  in  full,  and  the  amount  of  bill,  $87.50  (see  Fig.  8C), 
and  marked  96  in  ledger  folio  column  of  Sales  Book  (Fig.  4,  page  21). 

Near  the  close  of  the  day  we  listed  and  added  the  Cash  Sales,  amount- 
ing to  $20.00,  and  credited  same  on  Cash  Book  (Fig.  6,  Col.  E,  page  31). 
We  do  not  post  Cash  Sales  to  ledger  daily  —  only  total  at  the  end  of 
the  month. 

Personal  Expense 

October  6th  —  I,  John  Wilson,  needed  money  for  household  expenses, 
so  drew  $20.00  from  Cash  drawer,  and  put  in  a  receipt  for  that  amount, 
which  was  charged  up  on  the  credit  side  of  the  Cash  Book  (Fig.  6,  Col.  P), 
and  then  posted  to  debit  of  my  account  on  the  ledger  (  lit,'.  8A,  page  35  I. 

Brown  and  I  broke  nearly  even  today,  as  he  sold  a  more  profitable  bill, 
though  mine  was  slightly  greater  in  amount,  but  had  more  staples.  The 
bills  sold  were  to 

Henry  Moore,  sold  by  Brown  $67.20,  charged  on  Sales  Book  - 
4,  page  21),  posted  ledger  132  (Fig.  8C,  pa^e  36  I. 

Frank  Welsh,  sold  by  Wilson  $74.00,  charged  on  Sales  Book  (Fig. 
4  ),  po>ted  ledger  137  (Fig.  8C,  page  36). 


COMMENCING  BUSINESS  29 

These  ledger  accounts  were  opened,  indexed  and  posted. 

Before  closing  for  the  day  we  listed  and  added  the  Cash  Sales,  recon- 
ciling this  amount  with  the  count  of  money  in  drawer,  then  credited  the 
sum,  $30.00,  to  sales  in  the  cash  book  (Col.  E,  Fig.  6,  page  31). 

Wages  Paid 

October  7th  —  Paid  cash  to  Brown,  wages  for  week  ending  October 
7th,  $9.00,  and  charged  on  Cash  Book  in  expense  (Col.  O,  Fig.  6, 
page  31). 

Expenses 

As  remarked,  there  is  no  wages  "  ledger  account,"  because  in  this  set 
we  charge  all  items  of  Expense  such  as  wages,  heat,  light,  taxes,  insurance, 
etc.,  to  the  one  account  —  Expense  (Col.  O,  Fig.  6).  We  put  the  figures 
in  that  column,  do  not  post  to  Ledger  daily,  but  at  end  of  month  add  this 
column  of  Cash  Book,  and  post  total  to  ledger.  If  an  examination  for 
comparison  is  desired,  the  amount  may  be  classified  on  a  piece  of  paper, 
totaled  by  class  or  character,  and  memo  made  on  margin  of  Cash  Book, 
or  ledger  page,  for  further  reference. 

Cash  Sales  tickets  listed  and  totaled,  then  compared  with  the  count  of 
cash,  amounting  to  $40.00,  posted  in  Cash  Book  (Fig.  6,  page  31)  to 
credit  of  sales. 

October  8th  —  Cash  sales  listed  and  counted,  and  agreed  with  cash 
in  drawer,  and  credited  to  sales  in  Cash  Book,  $62.50.  (See  Fig.  6, 
Col.  E,  page  31). 

Cash  Balance  for  Change 

Of  course,  you  understand  that  each  day  there  should  be  a  certain 
amount  of  cash  in  drawer,  to  make  change,  and  this  balance,  or  amount  is 
always  deducted  from  total  amount  found  in  drawer  at  close  of  day,  to 
balance  Cash.  We  think  $20.00  in  assorted  denominations  sufficient  for 
change  in  the  early  hours,  and  have  set  that  sum  as  the  regular  balance 
to  be  retained,  and  deposit  the  remainder  and  all  checks  received,  daily  in 
bank. 

October  9th  —  Cash  sales  listed  and  counted,  agrees  with  cash 
amounting  to  $50.00,  is  credited  on  Cash  Book,  page  2,  to  sales.     (Fig.  6.) 

William  Cox  called  to  say  he  had  sold  some  hogs  and  wished  to  pay 
part  of  his  account,  handing  in  $50.00,  which  was  credited  to  his  account 
on  Cash  Book,  page  2,  and  at  once  posted  to  his  ledger  account,  page  96 
(Fig.  SC,  page  36),  on  the  credit  side.  Entry  in  Cash  Book  has  that 
page  96  number,  written  in  space  ledger  folio. 

October  10th  — Cash  Sales  listed,  totaled  and  compared  with  Cash 
as  counted,  are  credited  on  Cash  Book  amounting  to  $90.00.  (See  Cash 
Book,  page  2,  Fig.  6,  Col.  E,  page  31.) 


CHAPTER    IV 

Closing  Books  for  Month — Set  1 

INSTEAD  of  multiplying  entries  and  increasing  the  bulk  of  this  work, 
let  us  imagine  that  the  business  done  as  shown  in  foregoing  pages  is 
for  a  full  month  and  that  we  are  at  the  end  of,  or  on  October  31. 
We  will  now  close  the  month's  work, —  balance  Cash  Book  and  bring 
down  cash  balance  for  beginning  next  month,  rule  and  close  sales  book, 
take  off  trial  balance  —  close  up  for  year,  make  a  Balance  Sheet  showing 
results  of  business  done,  and  how  much  we  now  owe  and  what  we  have, 
with  which  to  pay  it. 

Closing  Cash  Book  for  the  Month  —  Debit  Side  of  Cash  Book 

The  amounts  received  have  not  only  been  entered  in  their  respective 
columns  E,  F  &  G,  but  also,  for  convenience,  in  the  Total  column  H,  so 
that,  at  any  time,  we  may,  by  the  footings  of  this  column  II.  know  exactly 
how  much  money  we  have  received  for  the  month. 

To  prove  it,  we  tan,  at  any  time,  foot  the  other  three  columns  E,  F, 
G  and  add  their  totals,  which  should  equal  the  "  Total  "  column  II.  Credit 
side  of  cash  book  may  be  proved  the  same  way. 

At  the  end  of  the  month  we  always  rule  up  the  Cash  Book,  to  keep  the 
cash  transactions  of  that  month  separate  from  the  succeeding  month,  and, 
for  convenience,  prove  the  totals,  then  by  carrying  into  the  Sundries  column 
the  footings  of  the  other  two  and  making  a  new  footing  of  Sundries  col- 
umn, which  should  then  agree  with  Total  column. 

Ruling  Debit  Side  of  Cash  Book 

For  example,  we  find  pencil  footing  of  Sundries  column  G  is     $1,000.00 

We  rule  a  red  line  under  pencil  footings  Cash  Sales  E,  write 

this  in  ink  and  carry  over  on  line  10  to  Sundries  column.  .  .  292.50 

ruling  red  line  under  and  across  columns  E  &  F  on  line  10. 

We  rule  under  pencil  total  customers,  column  F  on  line  11, 

putting  footing 50.00 

in  ink  and  carrying  to  Sundries  column  G. 

Rule  red  line  across  columns  F,  G  and  H  on  line  11,  and  now 
foot  "  Sundries  "  G,  "  Total  "  column  H,  bring  new  totals 
down  in  ink  on  line  1  2,  showing  these  totals  prove  and  that 

you  have  received  in  October,  Cash $1,342.50 


CLOSING   BOOKS  FOR  MONTH  — SKT   1 


31 


2 


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Fig.  6  —  Right  Hand 

Ruling  Credit  Side  of  Cash  Book 

Rule  Merchandise  column  N, —  put  total  in  ink  and  carry  to 
Sundries  column  P 

Rule  Expense  column  O, —  put  total  in  ink  and  carry  to  Sun- 
dries column  P 

These  added  to  pencil  footings  above,  of  Sundries  column,  or 


$15.00 

39.00 
70.00 


are,  after  ruling,  totaled,  showing  amount  paid  out  in  Oct.,        $124.00 
We  now,  on  a  scrap  of  paper,  deduct  amount  paid   from 

amount  received,  showing 1,218.50 

or  the  amount  of  balance  —  excess  of  receipts  over  payments. 
We  put  this  balance  in  ink  in  Sundries  and  in  Total  column 

and  then  foot $1,342.50 


32         BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

showing  both  sides  equal.  Rule  up  both  sides  on  line  12  and  bring  down 
the  Balance  of  Cash  on  hand  to  the  dibit  side,  in  both  Sundries  and  Total 
columns,  showing  balance  of  $1,218.50,  to  start  with,  Nov.  1st. 

The  reason  we  place  the  amount,  also  in  the  Sundries  Column  G,  is 
because  every  amount  in  the  Total  column  must  also  appear  in  one  of  the 
distribution  column-  E,  F  or  G, —  that,  at  all  times,  the  total  of  all  three 
columns  must  equal  or  prove  the  total  footing  of  the  Total  column. 

We  now  post  the  total  of  column,  Cash  Sales,  $292.50,  to  credit  of 
"  Sales  "  account  in  ledger,  on  the  credit  side.  (  Fig.  8A,  ac<  I.  8,  page  35.) 
Customers  have  been  credited  their  receipts  at  the  time  paid; 
Sundries  have  been  credited  their  receipts  at  the  time  paid; 
hence  in  closing  Cash  Book  or  making  totals,  make  check  (  \  )  mark  in 
column  B  and  K,  ledger  folio,  as  they  have  been  posted  once  and  now  no 
posting  is  made  of  totals.  Total  amount  received,  $1,342.50,  is  posted  to 
debit  side  of  cash  account  in  the  ledger  (Fig.  8A,  page  35),  because  we 
have  received  that  amount  of  cash,  credited  the  persons  or  accounts  from 
whom  received  on  their  ledger  accounts,  and,  after  receiving  the  cash 
(the  cash  drawer,  Bank  or  Mr.  Cashier)  owes  the  store  that  sum  in  cash. 
from  them,  turned  the  cash  over  to  the  drawer  or  bank:  consequently  cash 
The  Cash  Account  in  the  ledger  should  agree  with  the  cash  balance  shown 
by  the  Cash  Book  and  this  amount  is  the  money  in  bank  together  with 
the  amount  in  the  store. 

Sales  Book 

As  we  have  posted  the  sales  from  the  Sales  Book  to  the  debit  of  each 
customer  at  the  time,  so  now  at  the  end  of  the  month  we  credit  the  total 
sales  as  shown  by  the  Sales  Book  to  Sales  Account  in  the  Ledger.  (Fig. 
8A,  page  35). 

Thus,  all  the  amounts  debited  the  customers  equal  the  total  credited 
to  sales, —  again  giving  every  debit  a  corresponding  credit. 

Trial  Balance 

You  are  now  ready  to  take  off  a  trial  balance  (Fig.  9,  page  37)  to 
see  what  the  books  show  for  the  first  month's  business. 

The  accounts  in  the  ledger  are  examined  and  footed  in  pencil,  and  to 
the  left  of  columns  of  each  account  is  placed  the  difference  between  the 
larger  and  the  smaller  totals,  showing  either  an  excess  of  credits,  a  credit 
balance  or  —  an  excess  of  debits  or  a  debit  balance.     (Fig.  8A,  B,  C.) 

We  then  take  a  sheet  of  paper  with  three  columns  on  the  space  to  the 
right,  using  the  left-hand  side  for  page  of  ledger  account,  then  the  name 
of  the  account.     The  first  column  is  simply  for  grouping  the  accounts  of 


.  CLOSING   BOOKS  FOR   MONTH  — SET   1  33 

same  class  —  either  debits  or  credits  —  such  as  Accounts  Payable  or 
Accounts  Receivable.  Mark  the  second  or  centre  column  "  Debit."  Mark 
the  third  or  last  column  to  right  "  Credit." 

We  list  on  this  sheet  all  the  open  accounts  or  those  showing  balance, 

First  the  ledger  page  of  the  account 

Then  the  name  of  the  account  —  and 
if  not  of  a  group  or  class  —  the  balance  shown  in  the  ledger,  in  the  debit 
column  all  debit  balances  —  in  the  credit  column  all  credit  balances. 

If  a  number  of  balances  belong  to  one  group,  such  as  Accounts  Pay- 
able, put  all  those  credit  balances  in  the  grouping  column  and  extend  the  total 
of  this  group  to  the  credit  column, —  likewise  the  Accounts  Receivable, — 
debit  balances  in  this  grouping  column  and  then  extend  the  total  of  that 
group  to  the  Debit  column. 

The  grouping  columns  show  the  individual  balance  of  each  of  those 
you  owe  (Accounts  Payable),  and  also  what  each  of  those  owing  you 
grouped  as  Accounts  Receivable,  and  the  other  column  what  both  of  those 
classes  amount,  to  or  — 

total  Accounts  Payable  ( in  this  case),         $1,050.00 
and  total  Accounts  Receivable  (in  this  case),         227.50 

Then  foot  the  debit  balances  and  the  credit  balances,  when,  if  you 
have  made  no  mistake,  you  will  find  that  both  of  these  totals  are  of  the  same 
amount  —  one  total,  $2,600.00,  or  what  you  owe  —  the  other  amount, 
$2,600.00  owing  to  you,  with  which  you  can  pay  it. 

Because  you  have  on  the  books  given  credit  to  each  man  or  thing  for 
the  amount  received  from  them  and  charged  or  debited  each  one  with  the 
amount  delivered  or  given  to  him. 

To  put  it  another  way. 

The  books  you  keep  are  simply  a  record  of  the  transactions  the  store 
has  had  ■ — ■  what  it  received  and  the  amount  of  it ; 

what  is  parted  with  or  given  and  the  amount,  and  both  the  giver  and  the 
receiver  are  shown ;  for  there  is  no  giver  unless  there  is  a  receiver  —  either 
person  or  place  or  account  which  must  account  for  the  gift. 

The  books  should  show  all  items  both  debits  and  credits  belonging 
to  the  period  or  which  occurred  up  to  the  time  the  balances  are  made, 
whether  goods  bought,  expenses  incurred,  cash  received,  goods  sold  or 
exchanged,  and  of  every  nature  and  no  entries  should  be  left  to  come  in 
later,  because  the  accounts  should  be  a  true  statement,  as  near  as  mav  be, 
as  of  the  date  stated,  for  the  whole  business. 


34         BOOKKEEPING  AND  BUSINESS  .MANAGEMENT 


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CLOSING  BOOKS  FOR  MONTH  — SET   1 


35 


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The  general  or  representative  accounts  are  kept  separate  from  the 
groups  of  "  accounts  payable  "  or  the  accounts  owing  by  the  concern  and 
also  from  the  group  "accounts  receivable"  or  accounts  which  are  owing 
or  to  be  received  bv  the  firm  and  which  must  be  collected. 


36         BOOKKEEPING  AND  BUSINESS  MANAGEMENT 


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CLOSING   BOOKS   FOR   MONTH-    SET    1 


37 


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Fig.  9 

In  a  large  business  owning  many  classes  of  property,  each  item 
has  its  own  ledger  account  such  as  store  building,  warehouse,  stable,  and, 
if  vacant  property,  Lot  No.  .  .  . ,  etc. 

The  ledger  balances  of  these  accounts  are  stated  separately  in  the  first 
column,  the  total  of  the  group  carried  to  the  second  column  so  that  the 
proprietors  may  see  at  a  glance  not  only  the  balance  of  each,  but  the  total 
of  the  group,  or  investment  in  that  class  of  property.  Some  large  concerns 
consolidate  or  charge  all  these  balances  into  one  ledger  account  —  termed 
"  Real  Estate  &  Buildings,"  "  Real  Estate,  Buildings  &  Machinery  "  or 
"  Plant." 

The  Expenses  are  similarly  kept  separate  —  a  ledger  account  each 
for  "  Taxes,"  "  Insurance,"  "  Rent,"  "  Repairs  to  Building,"  if  owned,  etc., 
or  any  expense  of  housing  or  providing  a  home  for  the  business.  Other 
expenses  incurred  in  managing  the  business  such  as  ''Salaries"  (part  or 
whole  of  officers  or  proprietors  and  office  clerks) ;  Office  Expense  (station- 
ery, printing,  etc.),  "Interest,"  "Cleaning  and  Sweeping,"  etc.,  or  the 
expense  of  keeping  the  house  in  order  are  grouped  and  the  totals  of  these 
are  carried  to  a  third  column  —  showing  cost  of  administering  the  affairs, 
and  at  stated  periods  monthly  or  annually,  closed  into  an  account  termed 
"Administration  Expense." 


38 


BOOKKEEPING  AND  BUSINESS  MANAGEMENT 


The  several  classes  of  expense  incurred  in  selling  the  goods  are  also 
subdivided  and  finally  as  above  closed  into  an  account  called  "  Selling 
Expense."     This  subdivision  is  treated  more  fully  in  the  books  of  Set  3. 


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Fig.  11  —  Ledger  CI 


CHAPTER    V 

Closing  Books  for  Year—Set  1 

WE  now  come  to  the  closing  of  the  year,  presuming,  of  course, 
that  the  entries  shown  represent  one  year.     (See  Fig.  10.) 
We  make  Journal  Entry  E  —  giving  to  merchandise  the 
amount  realized  from  sales  of  goods  which  was  furnished  by  merchan- 
dise, $570.00; 

and  ask  merchandise  —  Entry  F  —  to  pay  all  expenses  of  running  the 
business,  by  assuming  payment  of  the  amount,  $39.00,  which  is  done  by 
debiting  merchandise  and  crediting  expense  —  thereby  balancing  Expense 
Account. 

We  have  listed  goods  now  on  hand  and  not  used  for  sales.  Take 
these  from  merchandise,  in  part  pay  for  what  they  owe,  and  turn  them 
over  temporarily  to  an  account  called  Inventory,  by  making  the  entry  G  — 
debiting  "  Inventory  "  and  crediting  Merchandise,  $666.00. 

Both  sides  of  Merchandise  account  are  now  footed  in  pencil  and  on  a 
scrap  of  paper,  we  figure 

Credits   $1 ,236.00 

Debits 1,104.00 

A  credit  balance  of $132.00 

We  treated  merchandise  as  an  agent  —  giving  him  a  stock  of  goods, 
which  he  was  to  sell,  and  after  paying  expenses,  pay  first  for  those  goods 
used,  then  any  surplus  he  might  have  or  profit;  therefore,  we  make  an  En- 
try "  H,"  debiting  Merchandise  and  crediting  "  Profit  and  Loss,"  $132.00, 
the  profit  for  the  year. 

Posting  is  completed  —  accounts  ruled  up,  balances  brought  down 
and  a  Balance  Sheet  prepared  (as  per  Fig.  12). 

(  Explained  in  detail,  page  47.) 

If  we  could  now  take  an  Inventory  (Fig.  14,  page  50),  or,  a  list  and 
the  value  of  all  goods  in  the  store,  and  store  room,  we  could  know  how 
much  we  had  made  or  lost,  supposing,  of  course,  that  our  furniture  and 
fixtures  were  as  valuable  as  when  we  bought  them,  and  that  we  can  surely 
collect  the  whole  amount  due  us  as  shown  bv  the  books,  without  anv  loss 
or  expense  in  collecting. 

39 


40 


BOOKKEEPING  AND  BUSINESS  MANAGEMENT 


We  devote  our  time  to  selling  the  goods  bought  and  must  depend  on 
the  Net  profit  we  make  on  such  sales,  for  our  reward. 

It  is,  therefore,  to  our  interest  that  we  handle  the  most  salable  goods 
ami  satisfy  our  customers  in  quality,  and  service,  in  order  to  increase  the 
amount  or  volume  of  our  sales,  since  the  greater  the  sales,  the  larger  the 
profit,  if  bought  right  and  properly  priced  when  sold. 

Necessary  Expenses 

To  this  end  we  must  incur  the  necessary  expense,  such  as  rent,  light, 
heat,  etc.,  etc.,  and  to  supplement  our  efforts,  may  have  one  or  more  sales- 
men, whose  wages  are  also  an  expense. 


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60 


c?0 


Fig.  12 


Balance  Sheet 


Net  Profit 

Consquently,  a  part  of  the  profits  of  the  business  must  be  used  to  pay 
these  expenses,  and  what  is  left  is  net  profit. 

The  Inventory  (which  will  be  explained  in  chapter  VII  in  detail,  how 
taken,  priced,  and  assembled),  in  this  case,  shows  goods  on  hand  at  cost 
prices,  amounting  on  October  31st  to  $666.00. 


Merchandise  and  Sales 

There  are  two  accounts  in  the  ledger  which  need  full  explanation  — 
one  Merchandise,  or  total  cost  of  goods  laid  down  in  the  store,  and,  the 
other,  Sales  Account,  which  shows  the  amount  of  Merchandise  sold  plus 
gross  profit,  or  a  profit  added  to  original  cost  of  goods,  out  of  which,  if 
properly  attended  to,  we  should  be  able  to  pay  all  running  expenses,  the 
proportion  of  losses  or  bad  debts,  depreciation,  wastage,  and  errors,  and 


CLOSING  BOOKS  FOR  YEAR  —  SET  1  41 

still  have  left  a  reasonable  profit,  termed  Net  profit,  to  repay  for  our  time, 
and  use  of  our  capital,  which  is  ascertained  by  "  closing  the  books." 

There  are  several  methods  of  closing  the  books,  or,  wiping  out  some 
general  or  strictly  representative  accounts,  one  by  transferring  the  debits  or 
credits,  and  adjusting  by  the  Merchandise  account  as  commonly  practiced, 
but  the  plan  below  may  suit  a  small  business;  the  entries  will  be  explained 
later. 

Closing  Merchandise  Account 

If  you  begin  the  year  with  a  stock  of  goods  or  amount  inventoried  at 
the  close  of  the  previous  year's  business,  add  that  amount  to  the  purchases 
of  the  current  or  fiscal  year;  because  the  stock  then  on  hand  (with  which 
you  started  the  year)  added  to  the  purchases,  for  the  year,  give  the  total 
amount  of  merchandise  available  ior  the  sales  of  the  year. 

From  this  total  of  goods  (in  present  case) $1,065.00 

Deduct  the  amount  of  present  inventory 666.00 

which  shows  the  amount  of  goods  sold $399.00 

To  this  amount  add  all  expenses 39.00 

which  shows  the  cost  to  you  of  goods  sold $438.00 

But  since  these  goods  as  shown  by  Sales  account  were  sold  for  570.00 

your  net  profit  on  those  goods  is $132.00 

To  show  these  results  by  making  proper  entries  in  your  books,  you 
must  close  up  the  two  following  accounts,  so  that  they  show  no  balances. 

Closing  Sales 

Sales  Account,  by  giving  or  delivering  the  amount  or  total  credit 
balance  of  sales  to  merchandise,  which  leaves  no  balance  standing  in 
Sales  Account.    See  Journal  Entry  (Fig.  10)  and  ledger  account  (Fig.  11). 

Closing  Expense  Account 

Expense  account,  by  paying  those  expenses  from  merchandise  ac- 
count or  transferring  the  debt  due  by  expense  (a  debit  balance)  to  the 
shoulders  of  merchandise  account,  which  you  do  in  debiting  Merchandise 
account.     (Fig.  10,  page  38.) 

Closing  Merchandise  Account 

You  then  take  the  total  value  of  unsold  goods  from  Merchandise 
Account,  by  crediting  Merchandise,  and  open  an  account  styled  Inventory, 
to  which  you  debit  that  amount  of  unsold  stock.     (Fig.  10,  page  38.) 

Then,  if  Merchandise  Account,  after  the  closing  entries  are  made, 
shows  a  greater  amount  of  credits  than  debits,  it  has  a  credit  balance 


42         BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

which  is  the  amount  of  profit  for  the  year,  and  this  amount  is  delivered  to  or 
closed  into  an  account  styled — "  Profit  &  Loss,"  crediting  the  latter  account 
by  giving  to  it  and  debiting  Merchandise  (Figs.  10-11,  page  38),  which 
closes  Merchandise  Account.  (The  footings  of  the  debits  will  then  equal 
the  footings  of  the  credits,  and  no  balance  appearing,  red  lines  are  ruled 
under  the  pencil  figures,  which  are  then  brought  down  in  red  ink  under 
red  lines,  and  an  additional  red  line  ruled  under  the  ink  figures,  and  the 
account  stands  closed. 

If  on  the  other  hand  the  merchandise  shows  a  debit  balance,  after 
the  closing  entries  are  posted,  the  amount  of  that  balance  is  a  Loss  and 
must  be  assumed  by  Profit  &  Loss,  to  which  it  should  be  debited,  and 
merchandise  credited,  the  reverse  of  the  entry  for  profits  made. 

General  or  Representative  Accounts 

Until  familiar  with  accounts,  it  may  fix  the  transactions  clearer  in 
your  mind,  if  you  consider  general  or  representative  accounts,  all  other 
than  customers  and  jobbers,  as  persons,  Mr.  Cash,  Mr.  Merchandise,  Mr. 
Sales,  etc.,  etc. 

Cross  Entries 

Instead  of  handling  the  goods,  and  money,  in  these  closing  entries, 
we  make  delivery,  or  transfer  on  paper  by  means  of  cross  entries,  just  as  is 
done  in  a  public  warehouse,  or  grain  elevator. 

Example 

One  man,  "  A,"  places  in  the  warehouse,  50  barrels  of  sugar,  and 
takes  a  receipt  for  same,  which  is  noted  on  the  warehouse  books  as  belong- 
ing to  "  A." 

"  A  "  sells  the  sugar  to  "  B,"  gives  "  B  "  the  warehouse  receipt,  prop- 
erly assigned  on  the  back,  then  "  B  *'  turns  over  to  the  warehouseman  the 
receipt  acquired  from  "  A  "  and  requests  a  receipt  to  show  that  the  goods 
now  belong  to  him. 

Thus  you  see,  the  goods  are  taken  from  one  man  and  given  to  the 
other  simply  by  authorized  transfer,  or,  entry  on  the  books  of  the  ware- 
house. 

The  transfers,  or,  entries  on  our  books  may  lie  as  follows: 

To  close  Sales  Account  in  the  ledger,  credit  or  give  the  balance  stand- 
ing to  credit  of  Sales,  $570.00,  to  Merchandise  account,  by  Journal 
entry  (Fig.  10,  page  38)  as  follows: 

Sales  Account,  Debit $570 . 00 

To  Merchandise  Account,  Cr ,.  .  $5  70.00 

Balance  standing  to  credit  of  sales  and  to  close  that  account. 


CLOSING  BOOKS  FOR  YEAR  —  SET  1  43 

Closing  Expense  Account 

To  have  Merchandise  make  refund  of  money  paid  out  to  run  the 
business,  or  assume  the  Expense  account,  make  following  entry  in  Journal 
(Fig.  10,  page  38): 

Merchandise  Account,  debit, $39.00 

To  Expense  account,  credit, $39.00 

For  balance  of  Expense  account  to  be  charged 
Mdse.  and  close  Expense  Account. 

Inventory  Account  Opened 

To  get  the  goods  which  are  unsold  temporarily  out  of  custody  of 
merchandise  and  put  the  same  in  the  new  account,  we  enter  in  Journal 
(Fig.  10,  page  38): 

Inventory  Account  —  debit $666.00 

To  Merchandise  Account  —  Credit   $666.00 

For  stock  on  hand  unsold  per  inventory,  and 
that  amount  transferred. 

Results  of  Closing 

Having  made  these  entries  we  will  post  them,  which  shows: 

Sales  Account  has  been  closed  by  crediting  the  amount  of  its  balance 
to  merchandise  account.     (Fig.  10,  page  38.) 

Expense  Account  has  been  closed  by  debiting  the  amount  of  its 
balance  to  merchandise  account.     (Fig.  10,  page  38.) 

Inventory  Account  has  been  opened  and  debited  with  the  amount  of 
goods  shown  to  be  on  hand  by  inventory  or  balance  of  Merchandise  un- 
sold, and  because  originally  taken  from  Merchandise  Account,  has  been 
credited  back  to  Merchandise  Account. 

Merchandise  Ledger  Account  is  footed  in  pencil  and  appears  as 
follows : 

Merchandise  account,  debtor $132  .00 

To  Profit  &  Loss,  creditor $132.00 

Credit  side  of  Merchandise  transferred  being 
profits  for  year.     (Fig.  10,  page  38.) 

Very  small  and  light  pencil  footings  are  made  on  both  sides  on  the 
account  as  indicated  and  do  not  mar  or  disfigure  the  ledger. 

By  this  means  it  is  easy  to  ascertain  the  excess  or  balance  and  on 
which  side. 

If,  as  in  this  case,  the  credit  is  greater  by  $132.00,  it  shows  that  much 
profit. 

If  the  debit  side  had  been  greater  it  would  show  a  loss  or  that  the 


44 


BOOKKEEPING  AND  BUSINESS  MANAGEMENT 


cost  of  goods  added  to  the  expense  of  doing  business  exceeds  the  amount  for 
which  you  sold  the  goods. 


Mr.  Merchandise  is  Honest 

Thus,  you  see,  Mr.  Merchandise  furnished  the  goods  which  we  sell, 
and  which,  after  being  sold,  we  call  Sales,  to  distinguish  and  keep  account 
of  separately,  that  we  may  know  the  volume  of  business  done,  by  day, 
month  or  year. 

Mr.  Merchandise  also  refunds  at  the  end  of  the  year,  all  expenses, 
which  are  also  kept  separate  that  we  may,  by  comparison,  month  by 
month,  watch  for  any  leaks. 


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Mr.  Merchandise  is  honest,  he  gives  back  the  exact  amount  of  goods 
unsold  or  not  used,  to  be  turned  over  to  another  custodian,  temporarily, 
or  Mr.  Inventory  (Chapter  VII),  to  be  later  turned  over  to  the  new 
Merchandise  Account  of  this  year. 

Mr.  Merchandise  also  gives  up  at  the  end  of  the  year,  any  profits 
made.     (See  p.  47.) 

After  the  books  are  finally  closed,  a  Journal  Entry  is  made  closing 
Inventory  account  into  Merchandise  Account,  or  returning  to  Merchandise 
account  the  goods  on  hand,  which  were  placed  in  Inventory  account 
simply  to  arrive  at  results. 


CHAPTER   VI 

Debit  and  Credit  in   Another  Light 

IF  you  have  read  thus  far,  you  doubtless  understand  what  is  a  debit  and 
credit,  and  why  we  divide  all  transactions  into  these  two  classes, 
but,  to  put  it  another  way : 

Every  debit  must  have  a  credit,  since  no  property  can  be  received  or 
parted  with  unless  there  is  one  who  gives  —  who  must  have  credit,  and  one 
to  whom  it  is  given  —  who  must  be  debited. 

You  cannot  have  a  debit,  only,  without  a  credit;  nor  a  credit  without 
a  debit,  because  no  one  can  part  with  or  deliver  any  property,  unless  there 
is  some  one  or  thing  to  whom  it  is  given,  for  without  a  recipient  there  can 
be  no  gift. 

As  the  total  amount  of  all  debits  must  equal  the  total  amount  of  all 
credits,  it  follows  that  the  total  balances  of  all  debit  accounts,  must  equal 
the  total  amount  of  all  credit  balances,  as  shown  in  a  statement  called  a 
"  Trial  Balance."     (Fig.  9,  page  37.) 

In  your  books  should  be  shown  the  record  of  all  property  which  comes 
in  or  goes  out,  also  of  any  change  of  location,  if  taken  from  one  account 
and  placed  in  another,  as  transferring  the  debt  due  by  a  customer  to  cash 
account  when  the  debt  is  paid. 


Merchandise    and    Sales 

If  you  receive  goods  from  one  who  sells  to  you,  these  goods  are  placed 
in  merchandise  account  and  so  recorded  in  the  books  by  the  entry  debiting 
merchandise,  on  your  cash  book  if  bought  for  cash,  and,  on  your  journal 
if  bought  to  be  paid  for  at  some  future  time. 

When  any  part  of  these  goods  are  removed  and  delivered  to  a  pur- 
chaser or  customer,  the  location  of  the  debt  is  changed,  and  from  merchan- 
dise through  sales  the  amount  is  then  found  to  be  due  by  the  customer. 

Sales  will  settle  its  account  with  merchandise  at  the  end  of  the  year 
in  one  transaction,  for  the  sake  of  convenience,  as  shown  in  the  closing 
entries  (page  42). 

45 


46         BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

What   Composes  a    Sale 

If  you  have  transferred  from  merchandise,  the  cost  value  of  the  goods, 
by  debiting  Geo.  Allen  with  $48.40  (the  amount  of  the  sale),  you  have 
transferred  to  Allen's  shoulders,  the  burden;  or 

1st.  The  value  or  cost  of  goods  taken  from  merchandise. 

2nd.  The  proportion  of  all  expenses  belonging  to  that  sale. 

3rd.  The  percentage  of  net  profit. 

Instead  of  figuring  the  proportion  of  expense,  and  the  proportion  of 
profit  on  each  sale,  which  would  mean  an  endless  amount  of  work,  we 
allow  the  proportion  of  the  expenses  and  the  profit,  on  all  sales  as  made,  to 
remain  in  Sales  account  until  the  end  of  the  year,  when  division  is  made  by 
the  closing  entries,  giving  back, 

1st.  To  Merchandise  the  exact  amount,  or  cost  of  all  goods  taken 
from  it. 

2nd.  To  Expense  every  cent  previously  charged  that  account  for 
carrying  on  the  business  during  the  year;  and, 

3rd.     To  Profit  and  Loss  all  the  profits  on  every  sale  during  the  year 

When  Allen  pays  his  bill,  the  amount,  $48.40,  his  debt,  is  canceled 
by  crediting  his  account  with  the  money  received,  and  debiting  cash, 
because  the  money  Allen  owed  was  handed  in  by  him  and  turned  over  to 
the  Cashier,  who  is  now  accountable,  and  the  debt  formerly  due  by  Allen 
is  now  due  by  Cash. 

To  exemplify  the  repayment  by  merchandise,  as  shown  by  the  set  of 
books,  we  have  just  closed: 

How   Merchandise   is   Closed 

We  turn  over  to  Merchandise  account  the  total 

amount  realized  from  Sales,  because  all  the 

goods  sold  came  out  of  Merchandise  stock.  .  $570.00 

But  any  excess  or  difference  between  the  cost 

of  all  goods  bought,  or $1,065.00 

And  the  value  as  shown  by  the  inventory  of 

goods  now  on  hand,  or 666.00 

Show  actual  cost  of  goods  sold,  or $399.00 

which  sum  must  be  accounted  for  or  repaid  by 

Merchandise  account. 
The  total  expenses  incurred  to  make  the  sales.       $39.00 
must  also  be  assumed  or  paid  by  Merchandise 

account.  

The  total  amount  of  cost  of  goods  used  and 

expenses  therefore  is $438.00 


DEBIT  AND  CREDIT  IN  ANOTHER  LIGHT  47 

This  amount,  which  mu.^t  be  repaid  by  Mer- 
chandise, is  deducted  from  Sales $438.00 

Leaving  a  balance  of $132.00 

which  is  Net  Profit.  ,  $570.00 

or,  (See  page  42), 

Amount   to   be  credited   Merchandise   because 

we  take  away  the  unsold  goods $666.00 

Amount   to   be   credited   Merchandise   because 

we  must  transfer  the  credit  balance  of  sales  to 

credit  of,  or  give  Merchandise 570.00 

Making  a  total  credit  to  Merchandise  of .  .  .  .  $1,236.00 

From  which  we  ask  pay  for  or  deduct  the  total 

cost  of  all  goods $1,065.00 

Also  refund  expenses  by  transferring  the  debit 

balance  of  expense 39.00 

Or,  a  total  debit  of $1,104.00    $1,104.00 

Which,  deducted  from  the  total  credit,  leaves  a 

balance  of $132.00 

Or,  the  profit  which  must  then  be  transferred  to 

Profit  &  Loss  account. 


CHAPTER   VII 

Inventory 

IF  you  know  the  quantity  and  value  of  the  different  kinds  of  your 
property  at  any  two  dates,  you  could  then  by  comparison  of  quanti- 
ties and  values,  or  amount,  be  able  to  tell  whether  you  had  made, 
or  lost,  money  during  that  period,  and  how  much. 

It  makes  no  difference  whether  you  are  just  beginning,  or  have  for 
many  years  been  conducting  a  business,  you  could  learn  the  results  of 
your  dealings  between  any  two  dates  by  having  a  correct  account  of  your 
affairs,  both  at  the  commencement  and  at  the  end  of  the  period  in 
question. 

What  Should  Inventory  Show? 

Your  books  should  show  the  balance  of: 

1st.  Cash  on  hand  and  in  bank. 

2nd.  Accounts  receivable  or  due  you  by  customers  and  others; 

3rd.  Accounts  payable  or  due  by  you  to  others;  and, 

4th.  A  list  of  all  real  and  personal  property, 
which  should  be  listed  in  inventory  form  to  give  you  the  figures  as  a  start- 
ing point.     (Fig.  14,  page  50.) 

Depreciation 

At  the  annual  closing  date,  or  when  you  close  your  books,  the  items 
of  Real  Estate,  Machinery  (if  you  have  any),  Furniture,  and  Fixtures, 
and  every  other  account  may  be  taken  as  it  stands  on  the  ledger,  less  such 
depreciation  in  value  that  has  occurred,  and  which  an  examination  of  the 
actual  property  should  disclose. 

Reserve   for   Bad    Debts 

As  experience  has  well  shown,  the  Accounts  Receivable  are  not  all 
paid  in  full;  either  disputed  or  worthless  accounts,  in  those  now  stand- 
ing on  the  books,  may  develop  later,  hence  a  sum  is  usually  set  a-ide, 
called  Reserve  for  Bad  Debts,  which  proportion,  in  the  light  of  past 
experience,  may  be  deemed  sufficient. 

Depreciation  is  a  loss  and  must  be  met,  if  you  would  be  honest  with 

48 


INVENTORY  49 

yourself,  and  as  the  amounts  standing  to  the  debit  of  these  property  ac- 
counts should  be  their  value,  this  value  is  decreased  to  its  proper  figure 
in  each  case  by  crediting  it  with  the  depreciation,  and  debiting  that  amount 
to  profit  and  loss  account. 

The  list  of  merchandise  needs  no  separate  entry  to  bring  the  values 
into  line  if  they  are  priced  at  "  cost  "  —  or  market  whichever  is  lower,  and 
the  total  shown  as  merchandise  on  hand  is,  except  when  managed  as  depart- 
ments, placed  on  the  books  in  one  amount  "  Stock  on  hand,"  or  "  Inventory 
this  day." 

There  are  several  methods  used  in  taking  stock  or  inventory. 

One  Method  of  Preparation 

Some  merchants  start  several  weeks  before  inventory  time  to  straighten 
up  scattered  and  broken  stock,  count  the  contents  of  the  box,  bin  or  tray, 
write  on  a  slip  of  paper  the  contents,  placing  that  slip  in  with  the  goods, 
and  then  list  the  articles  again  in  a  book  marked  on  the  outside  "  Inven- 
tory 19—." 

"  Taken  Out  "  List 

During  the  interval,  between  this  preliminary  count,  and  the  date 
set  for  the  final  count,  each  clerk  is  instructed  that  when  he  removes,  for 
sale  or  any  other  cause,  any  article  from  a  box  or  bin  which  has  been 
counted,  that  he  make  a  note  in  a  memo  book  of  the  quantity  and  descrip- 
tion of  goods  so  removed.  The  book  for  that  purpose  is  hung  up  in  the 
department  in  which  these  goods  are  kept. 

At  the  round  up,  or  final  check  of  goods  in  stock,  the  memoranda 
in  the  "taken  out "  books  are  used  to  alter  the  figures  originally  listed  and 
the  slips  then  compared  with  the  revised  quantities  in  the  first  list,  and 
if  agreeing  in  toto,  which  has  rarely  occurred,  the  main  or  revised  list  is 
extended,  totals  reckoned,  the  figures  entered  in  the  Journal,  and  closing 
entries  made. 

As  errors  are  expected,  unless  there  are  serious  discrepancies  from  the 
revised  list,  they  are  unnoticed. 

This  method  has  gained  in  favor  in  man}-  large  retail  houses,  where 
the  difference  in  style,  quality,  packing,  etc.,  runs  into  many  thousands  of 
lots,  but  a  "  one  day  count"  should  always  be  had  when  possible. 

One  Day  Usually  Sufficient  for  Listing 

The  writer  has  superintended  many  large  inventories  and  has  always 
been  able  to  list  every  item  in  one,  or  at  most  two  days  and  evenings,  and 
though  the  hours  were  long  and  the  pace  strenuous,  the  fact  of  its  being 


50 


BOOKKEEPING  AND  BUSINESS  MANAGEMENT 


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Tlic  sheets  are  numbered  in  the  upper 
left-hand  corner  before  they  leave   the 
office  and  must  all  be  returned,  the  used 

\ 

1 

none  have  been  lost  or  mislaid. 

1           Each  team  is  handed  a  sufficient  quan- 
tity   and    list    made    to    whom    issued. 
\\  hen    returned   and   sorted   by   Depart- 
ment  the   former   numbers  are   ignored 
and    the    used    sheets    paged    in    upper 
right-hand  corner,  beginning  1   and  up, 

1       and  these  page  numbers  given  in  future 

I       reference. 

- 

1 

[  - 

}  - 

' '                               ' ' 

/ 

Amount  Forward, 

J  _- 

I 

Fie.  14 


done  only  once  in  a  year,  made  every  one  willing  and  anxious  to  have  it  over 
with,  as  a  relief. 

A  Drag  Net 

The  one  day  inventorv  acts  as  a  drag  net  and  catches  all  articles  at 


INVENTORY  51 

the  time  and  before  they  can  be  missed,  which  is  not  the  case  if  reliance 
is  placed  on  a  shifting  or  changing  and  long  drawn  out  count. 

The  method  advocated  is  to  devote  one  day  and  evening,  or  as  close 
to  that  allowance  as  possible,  after  the  preparation  is  made  for  same. 

Some  lines  of  business,  and  also  the  way  stock  is  carried  for  sale, 
vary  so  much  that  there  is  no  hard  and  set  rule  for  preparation. 

One  store  may  have  stock  which  can  be  made  ready  or  tidy  for  in- 
ventory in  an  evening  after  the  doors  close;  another  may  require  many 
times  one  evening. 

Preparation 

The  first  rule  will  be  to  have  every  clerk  commence  to  arrange  several 
days,  possibly  weeks,  before  the  big  day,  all  broken  or  loose  stock  in  his 
department  as  neatly  and  in  packages,  bundles,  or  piles  of  even  quantity, 
say  10,  25,  50,  100  or  1,000,  as  the  case  may  be,  so  that  when  selling  he 
need  break  but  one  lot  at  a  time.  When  the  final  count  is  made,  the  odd 
lots  can  be  easily  added,  and  the  remnants  of  broken  packages  then 
counted  and  rapid  progress  made. 

The  reserve  stock,  whole  packages,  cases,  etc.,  frequently  in  the  cellar 
or  store  room,  are  chalked  as  to  contents,  piled  in  regular  tiers  or  rows 
in  even  quantities  for  convenient  listing.  Corners  are  cleaned  out,  spaces 
under  counters,  benches,  and  shelving  are  swept  free  of  litter  so  that  every 
article  may  be  easily  seen. 

Caller  and  Lister  in  Each  Team 

On  the  evening  of  December  3 1st  teams  of  two  men  each,  one  to  call, 
who  must  be  thoroughly  familiar  with  the  goods  he  has  been  assigned  to 
call,  and  his  partner,  the  lister,  a  rapid,  legible  writer,  start  to  work. 

Space  Assigned 

Each  team  is  given  a  section,  well  denned  by  limits,  of  the  goods  they 
are  to  list  —  the  lister  is  provided  with  loose  leaf  inventory  sheets  (Fig.  14) 
and  usually  a  board  clip  on  which  to  hold  them  evenly  and  firmly  while 
writing.  Space  assigned  to  the  several  teams  should  be  determined  in 
advance,  taking  into  consideration  the  character  of  the  work  and  the 
aptitude  of  each  team. 

Calling  and  Listing 

The  usual  or  staple  goods  are  called  by  the  caller,  by  quantity  or 
weight  or  description,  and  listed  by  his  partner,  who  repeats  the  call  as  he 


52         BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

writes  it,  so  that  the  caller  may  know  that  he  is  understood.     All  such 
goods  are  later  priced  in  the  office  at  leisure. 


Cost  Marked  Goods 

Specials,  or  goods  only  occasionally  handled  which  at  the  time  they 
are  put  on  sale  should  have  been  plainly  priced  and  cost  marked,  have  the 
cost  now  copied  on  the  inventory  to  avoid  unnecessary  work  later.  (See 
Cost  Mark  in  Glossary.) 

Shelf   Goods   Logically   Arranged 

If  the  stock  is  logically  arranged,  in  case  of  a  general  store,  in  the 
Grocery  department,  all  the  canned  goods  are  grouped,  each  kind  to  itself, 
or  its  space,  so  that  articles  of  one  brand  can  be  listed,  the  similar  article 
of  another  brand  follow,  all  fruits  kept  on  their  own  shelves;  then  vege- 
tables, etc.,  and  follow  with  all  shelf  goods,  etc.,  in  some  order,  listing 
all  groceries  on  grocery  sheets,  all  shoes  on  sheets  for  that  department, 
•etc.,  etc. 

The  Case  and  Package  goods  are  dealt  with  in  the  same  manner,  and 
though  two  or  more  teams  list  goods  in  another  section  of  the  same,  and 
also  different  departments,  each  sheet  will  have  on  it,  only  goods  of  one 
department. 

Sheet  Initialed  and  Location   Noted 

When  the  goods  are  all  listed,  the  sheets  are  sent  to  the  office,  each 
clerk  having  his  initials  on  the  sheets  taken  by  him,  and  in  the  upper  cor- 
ner of  the  sheet,  the  location  of  those  goods,  thus : 

Location  on  Inventory  Sheets 

"  East  end  of  store  room  "  or  "  Back  part  of  cellar,"  on  "  Shelves,'' 
etc.,  so  that  any  goods  listed  may  be  easily  located  if  wanted. 

Sheets  Arranged  by  Departments 

These  sheets  are  arranged  by  departments,  or  class  of  merchandise, 
and  then  numbered  1,2,3  and  up,  or  paged  in  the  right-hand  upper  corner 
(Fig.  14,  page  50)  for  indexing.  That  is  the  permanent  order  in  which 
they  are  finally  to  be  arranged  for  future  reference.  The  numbers  in  the 
nipper  left-hand  corner  are  issuing  numbers  and  simply  used  to  verify  the 
return  of  all  sheets  or  locate  by  whom  mislaid. 

The  prices  are  then  put  in,  extensions  made,  and  footed,  and  those 


INVENTORY  53 

operations  are  checked  by  other  clerks  so  that  every  price,  calculation  and 
footing  has  been  verified. 

On  a  blank  inventory  sheet  these  sheet  totals  may  be  listed: 


Sheet 

No. 

1 

Gi 

roceries 

$87.50 

u 

(C 

2 

" 

93.00 

K 

it 

3 

ti 

140.70 

<! 

a 

etc. 

« 

(1 

26 

it 

77.80 

$1 

,743.50 

(( 

a 

30 

D: 

ry  Goods 

$14.80 

It 

a 

31 

<< 

;             a 

36.92 

and  finally  a  summary  is  made  on  another  inventory  sheet : 
Sheets     1-26     Groceries  $1,743.50 

"       30-38     Dry  Goods  347.60 

39-46     Hardware  739.42 


$2,830.52 


Finish  Figuring  Promptly 

Though  the  pricing,  extensions  and  footings  need  not  be  done  the 
same  evening,  but  wait  for  a  more  convenient  time,  it  is  preferable  to  get 
it  figured  at  the  earliest  possible  moment  so  that  the  "  closing  entries  "  can 
be  made;  but  on  no  account  should  taking  of  the  inventory  be  delayed  or 
interrupted  until  finished,  thus  avoiding  any  omission  or  goods  overlooked, 
which  might  occur  if  articles  are  taken  out  or  disturbed  before  the  count 
is  completed. 

Footing  and   Checking   Inventory 

The  prices,  extensions  and  footings  are  checked  preferably  by  differ- 
ent clerks  from  those  first  making  them  to  avoid  a  repeating  error,  and  the 
sheets  when  finished  are  bound  in  one  pamphlet  by  running  strings  through 
the  holes  punched  in  them ;  or,  if  amounting  to  one  hundred  or  more  sheets, 
may  be  put  in  a  prong  binder  or  short  post  binder  and  thereby  be  securely 
preserved  for  future  reference. 

As  shown  by  (Fig.  14,  page  50),  each  clerk  who  prices,  extends,  adds 
or  checks  any  of  these  operations  should  place  his  initials  or  name  in  the 
space  provided,  so  that  any  error  may  be  placed  where  it  belongs.  After 
the  footings  are  completed,  an  adding  machine  may  be  profitably  used 
to  check  same,  but  in  no  case  should  dependence  be  placed  solely  on  a 
machine,  as  the  wrong  keys  may  be  accidentally  struck.  Adding  machines 
should  be  used  only  to  check,  not  to  make  footings. 


54         BOOKKEEPING  AND   BUSINESS  MANAGEMENT 

Indexing  Inventory 

A  very  convenient  index  may  be  made  by  using  one  of  the  inventory 
sheets  to  give  contents  by  class  or  subdivision,  thus: 

Groceries : 
Canned  Fruits         6-7-14  Rice  1-7 

('aimed  Vegetables      7-15  Sugar  1-8 


Cereals 

9-18 

Tobacco 

3-9 

Coffee 

2 

Hardware: 

Ammunition 

42 

Nails 

39 

Axes  and  Hammers 

41 

Rakes,  Hoes,  etc. 

44,  etc. 

simply  designating  the  class  or  special  article,  as  the  case  may  be, 
that  the  page  can  be  instantly  found  when  referring  —  for  quantity,  price, 
brand,  etc. 

This  indexing  may  be  done  by  an  intelligent  clerk,  or  a  bright  >tenog- 
rapher,  but  if  once  indexed  by  the  proprietor  or  an  interested  party,  he  will 
find  the  details  of  the  stock  so  thoroughly  impressed  on  his  memory,  and 
the  results  so  valuable,  that  he  will  call  this  his  own  "  special  job  "  in  the 
future. 

This  index  will  save  many  valuable  moments  when  comparing  and 
figuring  on  present  or  future  purchases. 

These  index  sheets  may  be  placed  at  the  beginning  or  the  front  of 
the  inventory. 

If  one  has  never  had  an  inventor}-  of  his  goods,  he  can  hardly  estimate 
the  other  advantages,  in  addition  to  arriving  at  his  financial  position. 

Advantages  of  an  Inventory 

These  are  a  few  of  those  advantages,  namely,  he  will  find: 

1 .  Goods  in  stock  which  no  one  knew  of,  possibly  how,  or  when 

purchased,  cannot  be  recalled; 

2.  Stickers  or  slow  sellers  lost  sight  of,  now  brought  to  light; 

3.  A  surplus  of  irregular  numbers  or  si/.es  of  some  article  of 

which  the  popular  si/.es  are  low,  probably  out ; 

4.  An  overstock  of  some  article  which  in  ordinary  judgment 

seems  unaccountable ; 

5.  The  quantity  on  hand,  of  good  sellers,  may  be  far  below  the 

average  quantity  which  should  always  be  on  hand; 

6.  Many  brands  of  same  class,  a  common  and  costly   fault 

with  many  a  small  or  careless  merchant; 

7.  And.  many  other  surprises  if  honestly  admitted. 


INVENTORY  55 

There  is  a  whole  sermon  in  these  two  homely  sentences,  which  are  apt 
to  come  out  in  Mitchell's  advice  to  any  one  of  his  many  out-of-town  visitors: 

"  Do  you  take  actual  account  of  stock  —  or  is  it  too  much  trouble? 
If  you  don't  —  don't  blame  anybody  if  you  fail."  He  may  not  realize  it, 
but  he  is  a  real  missionary. 

A  Case  in  Point 
One  jeweler  for  whom  the  writer  framed  a  system  of  monthly  inventory, 
found  that  he  did  not  know  what  he  had  in  stock.  He  discovered  much  to 
his  surprise  that  he  had  still  on  hand  a  quantity  of  special  goods  which  he 
had  purchased  over  ten  years  previously,  and  had  entirely  forgotten  them 
in  their  secure  and  quiet  hiding  places.  By  enthusiastic  co-operation  of 
his  clerks,  he  closed  these  out  in  less  than  two  months,  at  a  slight  cut, 
though  he  had  lost  ten  years'  interest  on  amount  invested. 

It  is  unnecessary  to  add  that  he  now  considers  the  inventory  indis- 
pensable. 

Goods  Should  be  Priced  at  Cost  or  "  Market  if  Lower  " 

The  goods  should  always  be  taken  at  "  cost  "  or  "  market  "  which- 
ever is  lower,  and  no  advantage  taken  in  rise  of  price,  for  any  profit  taken 
into  account  on  the  books  until  realized  should  not  be  thought  of,  for  you 
only  have  the  profit  when  goods  are  sold,  and  deterioration  or  decline 
may  even  put  the  figures  of  realization  lower  than  at  present. 

Flat  cost  is  the  price  you  paid  him  who  sold  the  goods  to  you; 

Prime  cost,  or  cost  laid  down,  is  flat  cost  to  which  has  been  added 
freight  or  carriage; 

And  if  in  as  like  good  condition  as  when  bought,  to  be  priced  at  prime 
cost. 

Depreciation 

In  valuing  machinery  and  fixtures,  proper  depreciation  should  always 
be  allowed,  and  to  keep  track  of  such  items,  the  following  is  the  usual 
method : 

Marking  Furniture  and  Machinery  for  Future  Identification 

Valuable  tools  are  either  stamped  with  a  die  or  branded;  machinery 
by  painting  on  each  machine  its  number  or  otherwise  designating,  and  the 
furniture  by  using  an  ordinary  druggist's  label  on  which  are  the  numbers, 
to  be  pasted  on  the  underside  or  in  one  of  the  drawers. 

When  these  articles  are  once  valued  and  entered  separately  by  number 
and  valuation  in  the  inventory,  an  excellent  record  is  furnished  to  check 
up  this  class  of  property,  as  each  article  retains  its  identity  by  its  particu- 
lar number. 

Be  just  to  yourself  in  taking  inventory,  for  no  man  is  as  big  a  fool  as 
one  who  deliberatelv  fools  himself. 


CHAPTER   VIII 

Percentage 

THE  written  sign  is  7°. 
Percentage  is  understood  by  thousands,  but  the  fear  that 
someone  may  read  this  who  lias  had  no  opportunity  of  previous 
explanation  is  the  excuse  for  the  following: 

"  Per  cent,"  which  is  a  contracted  Latin  phrase,  translated,  "  by  the 
hundred,"  or  percentage  is  the  rate  or  proportion  of  the  number  of  parts 
in  a  hundred,  as  ten  per  cent  is  ten  of  the  hundred,  etc. 

If  you  buy  a  lot  of  eggs,  say  200 

and  find  bad  ones  amounting  to      40 
and  the  remainder,  160,  are  good. 

Divide  the  bad  eggs  — 40  —  by  2    (the  number  of 

hundreds  in  the  lot)  =  20  or  20'    . 
Divide  the  good  eggs — 160  —  by  2  (the  number  of 

hundreds  in  the  lot)  =  80  or  80%. 
One  per  cent         (    1%)  of  the  200  is       2. 
Twenty  per  cent  (20%)   "    "  200  is     40  or  2X20. 
Eighty  per  cent  (80%)   "    "    200  is  160  or  2X80. 


Rule  to  Figure  Percentage 

To  find  what  percentage  a  smaller  is  of  a  larger  number,  divide  the 
smaller  by  the  larger  after  adding  two  ciphers  to  the  smaller,  reducing  it 
to  hundredths. 

But  in  figuring  percentage  in  our  money,  we  use  only  the  even  dollars 
(counting  as  one  dollar  any  amount  over  a  half  dollar)  in  the  larger 
amount  and  divide  this  into  the  full  number  of  cents  in  the  smaller,  because 
we  wish  to  know  how  many  cents  (or  hundredths  of  a  dollar)  the  smaller 
amount  has  to  one  dollar  in  the  larger. 

To  find  what  percentage  is  the  net  profits $2,796.25 

Of  the  sales  for  the  year 30,957.80 

divide  the  cents  279625  in  the  net  profits 

by  the  dollars    30958       in  the  sales. 

56 


PERCENTAGE  57 

30958)2796.25(903  — or  2796.25   is  9.03%  of  30957.80 
278622 


100300 
92874 

7426 

Or,  divide  the  cents  in  the  profits  by  the  dollars  of  the  sales  to  find  out 
how  many  cents  profit  there  is  on  one  dollar  of  sales. 

Rule  for  United  States  Money 

The  rule  is  use  even  dollars  to  divide  the  even  cents  to  find  what  the 
percentage  of  one  sum  of  money  is  of  another. 

Dividend 

On  investments,  such  as  stocks  or  bonds,  the  amount  of  dividends  or 
earnings  paid,  are  referred  to  as  the  percentage  paid  on  the  par  value  of 
the  principal. 

Interest 

Interest  on  a  Real  Estate  loan  is  also  calculated  at  a  percentage  of 
that  loan. 

Bank  Discount 

Interest  charged  by  a  bank  for  a  loan  is  collected  at  the  time  the  loan 
is  made,  or  termed  discount,  and  deducted  at  once  and  only  the  proceeds 
available  by  the  borrower. 

That  is,  if  you  have  your  note,  January  1,  1916,  for  $1,000.00,  pay- 
able four  months  after  date,  discounted  by  your  banker  at  6%,  he  will 

deduct  121  days  at  6%  —  20.17 $20.17 

and  credit  your  account  or  pay  you  the  proceeds .  .  979 .  83 


and  in  four  months  you  pay  your  note $1,000.00 

This  rule  is  universal  among  banks,  and  the  example  cited,  that  you 
may  know  how  to  check  or  prove  such  calculations. 

What  is  Percentage  of  Profits 

In  the  case  above  the  percentage  is  on  the  investment,  but  when 
we  speak  of  percentage  of  profits,  it  is  not  a  percentage  on  the  amount 
invested  in  goods  which  are  only  part  of  the  sales,  but  upon  the  sales,  which 
is  the  basis  on  which  the  Government  figures  when  reporting  on  Imports 
and  Exports —  the  basis  on  which  many  salesmen  are  paid,  the  basis  on 


58         BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

which  a  commission  house  will  charge  for  selling  your  produce,  the  basis 
on  which  a  city  may  license  a  jobber  or  manufacturer  for  the  privilege  of 
doing  business. 

Error  in  Figuring 

Some  merchants  may  know  at  the  end  of  the  year  what  proportion  of 
sales  is  net  profits  and  what  is  expenses,  yet  in  selling  goods,  lose  sight  of 
the  principle  of  figuring,  and  instead  of  figuring  percentage  on  the  price 
for  which  an  article  will  sell,  add  a  percentage  to  the  cost  of  the  article. 

The  Wrong  Way  to  Figure  Selling  Price 

For  example,  a  merchant  whose  expenses 'are  25%  of  sales,  intending 
to  price  his  goods  to  net  him  a  profit  of  10' ' ,  buys  a 

machine  which  costs $97  .00 

He  pays  freight 3  .  00 

$100.00 
He  adds  to  this  cost  2^''    for  expenses. 

10%   for  profit, 
a  total  of  35',c 35.00 

Making  selling  price $135.00 

But  the  machine  cost $100.00 

he  must  meet  his  expenses,  25%,  on  sale,  $135.00 33  .  75 

Consequently  the  cash  invoice  price  and  expenses $133.75 

For  which  he  only  receives 1 35  .  00 

and  makes  as  profit  only  or  not  quite  1 '.'  on  this  sale $1.25 

The  Correct  Way  to  Figure  Selling  Price 

If  he  had  observed  the  proper  method  of  figuring  and  taken  the  sell- 
ing price  instead  of  the  cost  price  as  his  basis  of  percentage,  he  would  have 
made  the  selling  price  $153.85. 

If  his  percentage  of  expenses  is  25 '<  he  should  remember  that  out  of 
every  dollar  received  as  sales,  he  must  spend  25  cents  to  pay  his  expenses 
of  doing  business,  and  of  every  dollar  of  sales  the  remaining  75  cents  must 
be  sufficient  to  pay  the  cost  of  the  goods  and  still  leave  10  cents  or  107° 
for  his  net  profits. 

He  should  figure  in  this  case  that  he  must  apportion  for 

Cost  of  goods $0.65 

For  expenses   .25 

For  net  profit .10 

For  every  dollar  of  sales $1 .00 


PERCENTAGE  59 

and  as  the  goods  costing  65  cents  must  sell  for  $1.00,  the  cost  of  the  goods 
is  65%  of  the  sale.  The  cost  of  the  machine,  $100,00,  is  only  65% 
what  it  should  sell  for,  therefore,  we  divide  one  dollar  by  65  cents  to  find 
what  per  cent  100  is  of  65. 

If  a  sale  is  divided  into  100  equal  parts,  or  100% 

and  if  your  expense  is  25  of  these  parts,  or  25% 

and  your  desired  profit  is  10  of  these  parts,  or     10% 
then  the  balance  or  cost  of  goods  is  65  parts,  or  65% 

As  all  these  hundred  parts  are  each  one  equal  to  the  other,  the  question 
is  simply  to  find  out  the  value  of  one  part,  which  is  done  by  dividing  (in 
this  case)  $1.00  by  65,  and  to  know  what  100  parts,  or  the  selling  price, 
amount  to,  multiply  one  part  by  100. 


Example 

65)$1. 00(1. 5385,  or  $1.5385  =  $1.00,  cost  of  goods, 
65  and  $153.85  =  $100.00,  cost  of  goods. 

350 
325 

250 
195 

550 
520 

300 

Proof:    Machine  cost $100.00 

25%  of  sale,  $153.85,  is 38.46  =  expenses. 

10%  of  sale,  $153.85,  is 15.39  =  profit. 

Selling  price  is $153.85 


or, 


Rule 

Stated  again,  if  sale  is  divided  into  100  equal  parts,  or        100% 
If  expense  of  doing  business  is  25  of  these  parts,  or  25% 

And  you  desire  to  keep  as  your  profit  10  of  these  parts  or      10% 

There  must  be  for  this  purpose,  expense  and  profits,  35% 

and  the  balance,  65  parts,  is  the  cost  of  the  goods,  or        65% 

as  all  these  parts  are  each  equal  one  to  the  other,  the  question  is  simply 
to  find  out  what  is  the  amount  of  one  part,  which  is  done  by  dividing  the 


60         BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

value  of  the  65  parts  or  cost  price  by  65  (the  number  of  parts)  and  to  find 
the  amount  of  selling  price,  which  is  100  parts  —  multiply  the  value  of  one 
part  by  100. 

Example 

If  your  expense  of  doing  business  is  21'  •  of  your  sales  and  you  desire 
to  make  a  profit  of  12/c  on  your  sales,  what  would  be  your  selling  price 
of  goods  costing  $1.22? 

Deduct  expenses 27 

and  profit 12 

—     3995   from  1009    =  61r;. 

Then  $1.22  is  61%  of  selling  price,  or  1.22,  is  the  value  of  61  parts. 
1.22  divided  by  61  is  2  dollars,  the  selling  [nice. 

Proof:     Expenses,  27%  of  2.00=     .54 

Profit,        Uc/c  of  2.00=     .24 
Cost  =1.22 

$2.00 

Percentage   Figures  Handy 

It  may  be  well  to  note  on  the  last  page  of  your  ledger  or  some  other 
convenient  place,  the  percentage  of  your  expenses,  with  date,  as  the  per- 
centage may  change  from  year  to  year.  With  the  memorandum  handy 
for  reference  you  can  at  any  time  figure  the  selling  price  of  goods  arriving. 

Of  course,  a  book  is  kept  in  which  daily,  monthly  and  yearly  sales  are 
recorded,  for  comparison  (Fig.  16A),  and  unless  you  wish  the  percentage 
of  expenses  kept  from  the  gaze  of  others,  this  percentage,  with  the  amount 
of  expenses,  may  be  written  just  at  the  bottom  of  the  page  on  which  the 
yearly  >ales  are  footed. 


Expenses 

Expense   Account   Subdivided 

If  so  desired  Expenses  may  be  separated  into: 

a.  Buying  Expense  —  To  which  account  is  charged  all  Expenses 
of  the  buying  department,  such  as  a  proportion  of  the  salary 
of  the  proprietor  or  manager,  wage-  of  all  clerks  in  that 
department,  or  proportion  of  wages  of  those  partially  en- 
gaged in  the  work  and  any  other  expense  belonging  to  that 
branch. 


PERCENTAGE 


61 


Alta$i/y-/bbCwi&faM  oTi^faAj  and  on/  io&&£ 


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Fig.  IS  —  Relative  Percentages 


SaLE<5   evMONT;+J    ^y^TAKS  ( 

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Fig.  16A 


Fig.  16B 


62         BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

b.  Store  Expense  —  Rent,  light,  heat,  repairs,  taxes  and  insur- 

ance accrued,  telephone,  washing  windows,  sweeping,  etc. 

c.  Office  and  Management  Expense  —  Proportion  of  proprie- 

tor's or  manager's  salary,  wages  of  office  force,  stationery, 
office  supplies,  etc. 

d.  Selling  Expense  - —  Wages  of  all  salesmen,  advertising,  pro- 

portion of  proprietor's  or  manager's  salary  and  any  other 
items  belonging  to  this  account. 

e.  Delivery  Expense  —  Wages  of  driver  and  boys,  expense  and 

care  of  teams,   trucks,   stable  or  garage   and   such   other 
expenses  properly  chargeable  to  this  account. 

The  proportionate  distribution  of  salaries  may  be  arrived  at  by  esti- 
mating the  time  that  anyone  is  employed  in  the  different  departments. 

Thus,  if  three-fourths  of  the  time  of  one  clerk  was  taken  up  by  selling 
goods  and  one-fourth  packing  and  shipping  —  the  distribution  could  be 
made  on  the  pay  roll  as  charged,  three-fourths  to  Selling  Expense,  one- 
fourth  to  Delivery  Expense.     (Fig.  39,  page  135.) 

In  subdividing  the  Expense  Account  as  above,  separate  ledger  ac- 
counts are  opened  for  each,  and  charges  posted  as  usual,  and  at  the  end  of 
the  month  cross  entries  are  made  crediting  each  with  the  total  charges  to  its 
account  for  the  month  and  then  charging  the  total  of  all  expenses  to  the 
account,  "  General  Expense,"  by  means  of  a  journal  entry. 

It  is  advisable  to  map  out  your  system  or  determine  just  what  sub- 
division of  Expenses  is  to  be  followed  and  continue  the  same  classifica- 
tion, when  possible,  so  that  in  the  months  and  years  to  follow  you  may 
have  the  same  class  of  Expenses  grouped  and  by  comparison  be  better 
able  to  judge  whether  in  line  or  out  of  proportion. 


I 


CHAPTER    IX 

Books  for  the  Retailer — Set  2 

F  you  would  know  how  much  you  owe,  how  much  is  due  you,  how 
much  you  have  made,  etc.,  a  simple,  inexpensive  set  of  four  books 
should  give  you  these  particulars. 


Cash  Book 

One  would  show  the  dates  and  amounts  of  cash  received  and  from 
whom,  the  dates  and  amounts  paid  out,  for  what  and  to  whom,  and  all  such 
entries  should  be  in  this  book  called  the  Cash  Book. 

The  Cash  Book,  which  furnishes  or  should  furnish  a  complete  record 
of  cash  transactions,  is  one  that  may  at  once  refresh  the  memory  of  a 
complainant  should  a  dispute  arise.  (Figs.  21,  page  92;  22,  page  93; 
32,  page  126;  and  33,  page  127.) 

Sales  Book 

One  a  list  of  charge  sales  or  bills  sold  to  be  paid  at  some  future  date, 
serially  by  date,  by  name,  by  address,  and  by  amount,  and  usually  by 
salesman  and  his  order  number,  called  the  Sales  Book  or  Sales  Journal. 
(Fig.  23.)  The  customers'  accounts  are  charged  and  posted  from  Sales 
Book  to  their  accounts  daily  and  the  total  credited  Sales  Account  at  end  of 
the  month. 

It  is  possible  to  use  part  of  the  regular  journal  for  charge  sales,  but 
the  small  outlay,  about  $1.00,  will  amply  repay  you  for  the  convenience  of 
having  one  book  solely  for  charge  sales. 

Journal 

Another  book  in  which  is  kept  a  record  of  purchases  by  date,  amount, 
name  of  seller,  and  for  such  other  entries  that  are  not  cash  nor  charge 
sales.     (The  Journal,  Fig.  20,  page  90.) 

Ruled   Up   Each   Month 

These  three  books  are  regularly  ruled  up  at  the  close  of  each  month 
to  separate  the  transactions  of  one  month  from  another,  and  other 
advantages. 

63 


64         BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

Ledger 

The  last  of  the  four  suggested  is  the  ledger  used  for  summing  up  each 
class  of  accounts,  and  to  show  the  condition  of  each  open  account  on  your 
books,  and  may  be  small  or  large,  plain  or  elaborate,  ^t36E33B,  as  you 
may  desire  to  choose  from  any  stationer's  stock.  (Figs.  24,  page  74; 
25,  page  95;  26,  page  96;  29A,  page  100.) 

Sales  Tickets 

Sales  tickets  of  numberless  varieties  are  carried  in  stock  by  those 
houses  which  make  a  specialty  of  such  work,  and  are  not  expensive. 
(Figs.  3A,  page  17;  3B,  page  19.) 

With  such  an  outfit,  costing  about  $15.00  or  less,  you  could  answer 
any  reasonable  question  about  the  financial  or  material  condition  of  your 
business,  except,  possibly,  the  exact  quantity  or  value  of  stock  on  hand, 
which  can  only  be  accurately  arrived  at  by  taking  an  inventory,  which 
should  never  be  at  longer  intervals  than  one  year. 

Estimating  Stock  on  Hand 

If,  however,  your  profits  have  had  a  uniform  average,  for  several 
years,  you  might  come  quite  close  in  your  figures  of  amount  of  stock  on 
hand  by  adding  to  your  inventory  of  the  first  of  the  year  — 

All  purchases  of  merchandise  since 

And  from  this  total  deduct  your  sales 

from  which  you  have  first  deducted  that  percentage  which  we  call  gross 
profit  (or  expense  and  your  average  net  profit).  See  percentage,  page  57. 
The  advantages  of  a  correct  and  simple  system  are  so  self-evident, 
the  cost  of  the  books  so  insignificant,  and  the  time  to  study  these  few  pages 
so  brief,  that  it  should  appeal  to  any  merchant  who  would  prefer  to  be  in 
that  class  of  five  who  succeed  rather  than  in  the  company  of  the  ninety-five 
who,  by  reliable  statistics,  are  known  ultimately  to  fail  or  give  up. 

A  small  set  of  books  of  the  kind  described  will  be  used  to  illustrate 
the  system. 

Our  Work  Starts.      Set  No.   2 

Let  us  suppose  that  Robert  Bell  &  Co.  took  inventory  December  30, 
1915,  last  year.  All  entries  were  properly  made  and  balances  brought  for- 
ward on  November  30,  1916,  and  from  that  date  or  on  December  1st  our 
labors  commence.     (Fig.  19,  page  89.) 

In  this  case,  Robert  Bell  keeps  a  diary  of  daily  transactions  in  past 
year,  styled  a  Day  Book,  and  has  an  outside  bookkeeper  come  to  the  store 
one  evening  in  the  week  and  write  up  his  books.     (See  pages  76  to  82.) 


BOOKS  FOR  THE  RETAILER  — SET  2  65 

Bell  preserves  all  receipts  and  documents  necessary  to  check  his 
memoranda. 

To  close  up  the  year's  business  it  is  necessary  to  have  a  record  of  prop- 
erty on  hand  at  the  beginning  of  the  business  year,  or  the  inventory,  and  a 
record  of  purchases,  etc.,  since. 

Trial    Balance   to    Start    This    Set 

The  trial  balance  as  of  November  30,  1916,  shown  here  will  be  taken 
as  correct,  and  the  inventory  balances  of  January  1,  1916,  will  appear  in 
merchandise  account.     (Fig.  24,  page  94.)     (See  Fig.  19,  page  89.) 

Trial  balance  November  30  —  Robert  Bell  &  Co.     (Set  No.  2.) 

Closing  Explained 

If  we  know  how  much  the  stock  amounts  to  at  the  beginning  of  the 
year,  and  the  cost  of  goods  bought  since,  we  deduct  the  present  inventory 
or  all  of  the  goods  that  now  remain  unsold,  and  the  remainder  is  the  cost 
of  all  the  goods  which  were  used  during  the  year  for  sales. 

If  we  know  the  cost  of  goods  used,  and  the  expense  of  buying,  hous- 
ing, handling,  and  selling,  together  with  the  depreciation  and  losses,  in 
fact,  the  total  expense  of  doing  our  business,  and  deduct  this  total  cost  of 
goods  used  together  with  the  total  expense,  from  the  sales,  the  remainder 
will  be  the  net  profit. 

The  difference  between  the  cost  of  goods  used  to  make  sales,  and  the 
sum  which  those  sales  amount  to,  is  termed  the  gross  profit,  out  of  which 
must  be  paid  the  expenses. 

For  example,  see  "  Merchandise  "  and  "  Trading  Account."  (Figs. 
29A,  page  100  and  29B,  page  101.) 

If  our  inventory  January  1st  was $3,967  .80 

and  our  purchases  Jan.  1st  to 

Nov.  30th   $20,042.23 

and  our  purchases  in  Dec.  .  .       1,353.41 

Total  purchases 2 1 ,395 .  64 

or  a  total  cost  of  goods $25,363.44 

and  we  deduct  goods  now  on  hand  per  in- 
ventory         4,185.62 

it  leaves  cost  of  goods  used  for  the  year's 

sales $21,176.82 

which  we  deduct  from  total  sales  of 30,957  .80 

Leaving  gross  profit $9,780. 98=31.60%  of  sales 


66         BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

From  this  gross  profit  must  be  deducted  all 

expenses 6,717  .  22=21. 70%of  sales 

Leaving  net  trading  profit $3,063 .  76=  9.907°  "     " 

From  this  trading  profit  we  de- 
duct interest  on  capital S360.00 

Less  profit  made  on  dis- 
count   $'36.60 

Less  profit  made  on  Bray 

Cons't 55.89 

92.49 

267.51 


showing  total  net  profit  or  gain $2,796.25=  9.03%  "     " 

(See  page  99.) 

Comparative  Sales  Record 

Books  are  usually  carried  by  stationers  with  a  great  variety  of  rul- 
ings, 2,  4,  6,  8,  10  and  12  columns,  and  are  not  expensive. 

It  may  be  well  to  select  one  of  six  or  eight  columns,  which  may  be  used 
to  keep  a  comparative  record  of  daily,  monthly,  and  yearly  sales;  though 
there  is  a  small  book  published  with  rulings  and  headings  for  the  purpose. 

See  Record  of  Monthly  and  Yearly  Sales.  (Fig.  16A  and  B, 
page  61.) 


CHAPTER   X 

Partnership 

IN  writing  up  this  set  of  books,  the  month  of  December,  1916,  is 
chosen. 
Robert  Bell  has  had  a  prosperous  business  and  concluded  to  grant 
the  request  of  his  clerk,  A.  L.  Davis,  who  had  served  him  long,  faithfully 
and  with  good  judgment,  to  take  him  into  partnership,  commencing 
January  last. 

Partnership  Agreement 

Bell  had  $5,000.00  invested,  and  Davis  could  raise  $1,000.00  cash, 
so  an  attorney  was  instructed  to  draw  up  a  partnership  agreement.  Among 
the  clauses  it  was  agreed  to  divide  the  net  profits  as  shown  by  the  books 
upon  closing  each  year,  five-sixths  to  Bell,  one-sixth  to  Davis,  allowing 
each  6%  interest  on  his  investment,  providing  that  Bell  receive  $25.00  and 
Davis  $15.00  per  week  salary. 

Selling  prices  were  to  be  calculated  upon  the  basis  of  the  average  of 
the  last  two  years'  expenses. 

The  inventory  at  the  beginning  of  the  year  showed  goods  on  hand  at 
inventory  cost  of  $3,396.80  (Merchandise  Account,  Fig.  24,  page  94),  and 
business  was  conducted  along  the  lines  Bell  had  found  successful,  until 
Nov.  30th,  when  the  transactions  are  taken  up  in  detail  and  hereafter 
continued  until  the  closing  of  the  year's  business. 

The  usual  transactions  taking  place  upon  the  books  of  the  average 
retailer  are  shown,  and  it  might  be  well  (or  advisable)  to  check  each  entry 
as  mentioned  and  follow  it  through  to  last  posting,  that  familiarity  with 
the  methods  pursued  may  be  more  easily  acquired. 

Duties  of  Partners 

Bell  is  the  active  manager  and  among  his  duties  are  passing  upon  or 
determining  whether  the  credit  of  charge  customers  is  satisfactory,  order- 
ing all  goods  and  supplies,  of  course,  consulting  those  most  qualified  to 
suggest,  and  such  other  general  duties  as  belong  to  that  position. 

Davis  is  assistant  manager,  and,  in  the  absence  of  Bell,  takes  over  his 
duties.     Both,  of  course,  are  active  in  waiting  on  customers. 

67 


68         BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

Duties  of  Clerks 

Cashier 
M.  E.  Denny  is  bookkeeper,  cashier,  and  office  clerk,  and  about  2:30 
every  afternoon  counts  and  balances  the  cash,  compares  cash  sales  list, 
deposits  all  checks  and  surplus  cash  in  bank,  reserving  the  usual  S20.00 
cash  for  change  in  the  drawer.  Balancing  cash  is  comparing  the  balance 
shown  by  the  Cash  Book  (the  difference  between  the  two  sides )  with  the 
cash  on  hand,  which  should  agree.  Cash  on  hand  is  the  total  amount  in 
bank  and  cash  drawer. 

Entering  Cash  Sales 

The  amount  of  cash  sales  then  shown  is  entered  up  on  the  Cash  Book, 
and  any  cash  sales  made  later  are  counted  in  the  next  day's  results. 

The  charge  sales  sold  and  billed  up  to  closing  time  are,  however, 
entered  for  that  day. 

To  O.  K.  Orders 
Orders  for  goods  to  be  charged  are  submitted  to  Mr.  Bell,  for  his 
approval,  these  orders  O.  K.'d,  then  are  passed  to  the  clerk  whose  duty  is 
to  fill,  and  after  that  the  duplicate  of  each  is  sent  to  the  office  for  entering 
in  the  sales  book,  the  original  goes  with  goods  to  customer  if  delivery  is 
made  by  driver,  but  mailed  if  shipped  out  of  town. 

Entering  Charge  Sales 
The  carbon  copy,  which  is  the  duplicate  of  the  bill,  of  course,  is 
checked,  if  not  already  done,  as  to  extension  and  footing,  by  the  book- 
keeper, and  then  entered  on  the  sales  book,  using  but  one  line  for  date, 
name,  address,  salesman's  initial  or  name,  his  order  number  and  the  amount 
of  the  bill.     (Fig.  23,  page  91.) 

Monthly  Statements 
At  the  end  of  the  month,  if  necessary,  send  statement,  only  dates  and 
amounts  of  bills,  and  total  of  account  with  any  credits  that  should  be  on 
the  account,  which  the  customer  may  check  from  the  bills  he  has  had,  ren- 
dered when  sale  was  made.  There  should  be  no  necessity  of  itemizing 
monthly  statements,  if  the  customer  understood  that  he  should  retain  his 
bills  for  checking  his  statement,  and  by  so  doing  avoid  much  unnecessary 
work  and  long  hours  by  the  bookkeeper. 

Statements  Kept  Written  Up 

It  is  customary  in  one  large  store  with  which  I  am  familiar,  to  head 

all  statements  as  bills  are  bought,  and  add  such  other  charges,  taking  the 

figures  from  the  sales  tickets  and  continuing  until  the  end  of  the  month, 

then  comparing  with  ledger  and  entering  balance  due  and  unpaid  on  the 


PARTNERSHIP 


69 


first  of  the  month  as  well  as  cash  paid  on  account  during  the  current  month. 
In  many  houses  the  bookkeeper  is  instructed  to  hand  the  manager  a  list 
of  all  past  due  accounts,  giving  name,  due  dates  and  amount.  From  this 
list  they  are  entered  on  the  Diary  for  dunning. 

This  comparison  is  an  excellent  check  on  the  charges,  the  footing,  etc., 
and  proves  a  splendid  aid  in  catching  any  errors  made  in  posting  and 
footing  customers'  accounts  in  the  ledger. 

Many  customers  call  and  pay  their  bills  before  the  end  of  the  month, 
and,  as  all  statements  are  written  up  except  the  cash  paid  and  the  footings, 
it  takes  but  a  moment  to  compare  with  ledger  and  hand  out  the  statement. 
Such  promptness  always  pleases. 


Returned  Goods 

When  goods  are  returned  for  any  reason,  an  occurrence  which,  unfor- 
tunately, cannot  always  be  avoided,  a  credit  memorandum  is  made  out 
showing  name  of  customer,  date,  articles,  and  amount ;  why  returned,  and 
when  possible,  the  date  of  purchase.  This  memorandum  referred  at  once 
to  Mr.  Bell,  for  his  approval.  If  passed,  the  customer  is  paid  the  amount, 
if  on  a  cash  sale,  or,  if  on  a  charge  sale,  is,  through  entry  in  the  journal, 
credited  his  account  and  charged  sales.  As  the  goods  came  from  stock 
through  sales,  which  account  was  credited  when  charged  to  customers, 
they  are  now  charged  back  (Figs.  20,  page  90  and  34,  page  129)  to  sales 
and  go  into  stock  to  be  accounted  for  by  stock  or  merchandise  at  end  of  the 

year,  when  closing  entries  are 
made.  If  goods  are  spoiled  or 
unsalable  the  loss  will  show  in 
the  round-up  of  closing  entries. 

Buying 

A  requisition,  or  Purchase 
Order  (such  as  may  be  bought 
from  any  good  stationer)  is 
made  out  in  duplicate,  by  car- 
bon, and  mailed  to  the  whole- 
sale house  when  ordering  goods, 
unless  bought  through  a  traveling  salesman  at  the  store;  should  be  the 
list  by  articles  and  price,  and  also  time  wanted  and  shipping  instructions. 
Each  requisition  is  numbered  and  the  shipper  requested  to  put  that 
number  on  each  package  shipped  on  that  order,  and  also  put  the  number 
on  his  bill  of  lading  and  invoice  to  facilitate  identifying  the  shipment  on 
arrival  and  checking,  which  is  done  by  comparing  with  the  duplicate  pur- 


CREDIT    HAEIvAO. 
a^verti Ha 

i 

rUI 

ftacredit  yo<A.r  ateourvr  for  goods  raUirncol 

CKcuoe 

Fig.  17A — Printed  on  distinctively  tinted  paper, 
that  it  may  be  noticed  at  a  glance.  Put  up  in 
blocks  of  SO  sets,  original  and  duplicate. 


70 


BOOKKEEPING  AND  BUSINESS  MANAGEMENT 


chase  order,  retained.     All  correspondence  about  any  invoice  should  refer 
to  the  purchase  number  for  identification.  ^ 

Buying  Through  Salesmen 

When  bought  through  a  salesman  he  should  write  the  order  in  his 
order  book  and  sign  the  carbon  copy,  retaining  the  original  for  his  house. 


PURCHASE.  ORDER  . 


I9_  REOA/W?  I9JO 


MESSRS  . 


PLEASE  SHIP  at  Once     TM£     £OOZ>S    0£LO<*   VIA 

placinc    ovrr  TiEquistTion  <VO.   OK  /A/rOICftG/i.    AND   SACH    PACKAGE 


ADVISE    PROMPTLy    IF  UNABLE    To  SHIP  AS  ABOVE   THAT  VYE  MAJC    ORDEr? 

Ds.i_i_  A  _D/w  is 


SM  ITHVILLE  ,  MO 


By. 


171!  —  Purchase  Order. 

Checking  Invoices  by  Count  and  Weight 

Should  any  difference  arise  as  to  article,  price,  terms  of  shipment  or 
substitution,  which  needs  correction,  note  at  the  time  on  the  invoice  while 
checking,  in  the  spaces  of  the  rubber  stamp  impression  (  Fig.  5,  page  25%), 
and  advise  the  shipper  at  once,  that  it  may  be  speedily  explained,  and 
quickly  and  satisfactorily  adjusted,  which  is  always  appreciated  by  repu- 
table houses,  and  willingly  complied  with.  Delay,  or  postponement  on 
your  part  makes  tracing  by  the  seller  difficult  as  time  rolls  on,  and  evi- 
dence is  lost  sight  of.  Failure  to  mention  a  difference  until  your  remit- 
tance shows  the  deduction,  which  possibly  is  not  then  fully  explained, 
leads  to  unfavorable  criticism,  and  oftentimes,  friction,  which  otherwise 
would  have  been  avoided. 

After  checking  the  invoice  it  is  entered  in  the  journal  to  the  credit  of 
the  seller  and  charged  or  debited  merchandi-c. 


Pay  Promptly 

If  your  bank  account  warrants  paying  the  invoice  within  the  ten  days 
in  which  to  take  advantage  of  the  discount  terms,  enter  on  your  diary  the 


PARTNERSHIP  71 

name  of  seller,  date  of  invoice,  and  amount,  on  the  page  of  day  to  be  paid, 
but  to  retain  your  good  name  for  fairness,  be  sure  to  calculate  the  mails' 
delay,  that  your  check  arrives  within  the  contract  time. 

Diary  for  Memorandum  of  Due  Dates 

If  the  bill  is  to  run  to  maturity  enter  on  your  diary  on  the  page  of  the 
day  to  be  remitted,  allowing,  of  course,  for  delay  in  transit. 

Punctuality  in  paying  your  bills  when,  and  not  after,  they  are  due, 
establishes  your  record,  and  should  favors  be  asked,  is  a  potent  factor  in 
influencing  the  decision. 

Other   Uses 

The  usual  diary  serves  many  purposes  of  convenience  and  time  sav- 
ing; it  shows  bills  to  be  paid,  notes  falling  due,  insurance  expirations, 
engagements  to  be  kept,  contracts  to  be  renewed,  slow  accounts  to  be  col- 
lected, etc.,  etc.  These  can  be  jotted  down  in  pencil  for  daily  examination, 
and  help  avoid  many  omissions  of  important  matters,  and  are  not  solely 
trusted  to  memory.  Never  burden  the  mind  with  facts  which  can  be  car- 
ried on  your  diary;  save  the  "  gray  matter  "  for  such  as  cannot  be  so 
tabulated. 

Pay  Roll.     (Form  39) 

If  the  employees  are  few,  a  page  in  the  back  of  the  journal  may  be 
used  to  record  date  of  engagement,  position  or  duty,  name  and  amount 
to  be  paid  weekly,  or,  otherwise;  such  a  record  has  saved  many  disputes. 
If  the  force  is  large,  get  a  regular  time  book  which  may  be  found  in  stock 
at  any  dealer  in  books.  From  this  book  you  can  make  up  your  pay  roll, 
putting  each  man's  wages  in  the  envelope  and  charging  the  total  amount  in 
one  item  on  the  Cash  Book  as  wages  paid. 

Putting  up  Pay  Roll 

If  suitable  change  is  prepared  and  the  exact  amount  of  the  total  pay 
roll  is  placed  on  the  desk,  the  last  envelope  to  be  filled  should  exactly 
agree ;  there  is  no  check  on  correction  of  amounts  enclosed  if  filled  from  the 
cash  drawer  and  no  safeguard  is  provided. 

The  proper  method  is  to  draw  a  check  for  the  total  pay  roll,  specifying 
what  denominations  the  banker  is  to  give  you,  and  keep  the  transaction 
separate  from  the  house  cash. 

Petty    Cash 

A  good  rule  is  to  deposit  daily  all  cash  received,  pay  all  bills,  except 
petty  expenses,  which  is  known  as  Petty  Cash,  by  check,  keeping  about 
$20.00  or  $40.00  for  change.     In  this  way  you  can  easily  check  up  the 


72         BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

bank  account  and  always  know  your  balance,  which  should  agree  in  both 
Cash  Book  and  Check  Book. 

Old  Way 
The  antiquated  method  of  keeping  any  sum  from  $20.00  or  any  odd 
amount  up  to  several  hundred  dollars  in  the  cash  drawer  from  which  you 
pay,  and  to  which  you  add  as  the  amounts  come  in,  balancing  once  a 
month,  or  as  it  might  occur  as  a  favorable  time  to  do  so,  has  resulted  in 
more  errors,  temptations,  disputes  and  ill  feelings  than  any  other  part  of 
business. 

Proper  Way 
The  approved  way  is  to  place  a  certain  even  sum  in  the  cash  drawer, 
sufficient  for  change,  and  for  petty  expenditures,  and  when  making  the 
daily  deposit  leave  that  sum,  so  that  at  any  time  if  no  other  cash  is  taken 
in,  the  amount  in  the  drawer,  either  in  money  or  in  money  and  tickets,  shall 
always  be  the  even  amount  so  reserved. 

All  petty  expenditures  are  on  a 


IWwed  of5>el\  fSfrvu, »? 

.-rfe  sttnvof 

7" 


'..,:,<</ 


regular  form  made  out,  dated  and 
signed  by  the  person  to  whom  paid, 
and  for  what  purpose.  If  the  busi- 
ness  is  large  or  the  expenditures  grow 
they  may  be  classified  and  listed  on 
the  back  of  the  last  ticket  and  charged 
pIG  uc  to  such  accounts  instead  of  Expense 

Petty  Cash  Ticket  and  brief  explanation  on  cash  book 

such  as  "  Mdse.,"  for  Expressage 
paid,  "  Sales,"  telegrams  from  salesmen,  Advertising,  for  postage  on  cir- 
culars, etc.,  etc. 

Petty  Cash  Ticket 
Petty  Cash  Ticket  for  disbursing  small  amounts,  usually  made  of 
tinted  or  cheap  manila  paper  and  in  blocks  of  50. 

At  certain  intervals,  usually  once  a  week,  frequently  daily,  or  at  any 
convenient  time,  the  tickets  are  listed,  amounts  footed  and  for  what 
expended,  a  check  is  made  out  for  total  of  that  sum,  the  cash  drawn  from 
bank  and  replaced  in  the  drawer.  The  amount  is  charged  on  the  Cash 
Book,  debiting  Petty  Cash  per  tickets,  and  figures  carried  to  the  expense 
column.     (Fig.  22,  Expense  col.,  page  93.) 

Balancing  Cash 

Usually  the  cash  is  balanced  when  the  deposit  ticket  is  made  up  and 
the  cash  and  tickets  remaining  are  a  good  check  on  amount  so  received. 

Advances  on  pay  roll  should  be  discouraged;  as  each  clerk  is  paid 
weekly,  his  earnings  should  suffice  for  his  needs. 


PARTNERSHIP  73 

Consigned  Goods 

Produce   to    Commission   Houses 

Many  country  merchants  buy  poultry,  produce,  etc.,  for  shipment  to 
some  commission  firm  in  a  larger  city,  to  be  sold  for  their  account.  Such 
a  shipment  is  not  a  sale  and  its  ultimate  value  can  only  be  determined  when 
the  account  of  sales,  or  report  on  same,  is  received  from  the  firm  to  which 
such  goods  are  consigned. 

Instead  of  charging  to  sales,  it  is  usually  charged   (Consignment 

account  of [the  name  of  firm  to  whom  consigned] )  and  kept 

separate  from  customers'  accounts,  which  are  sales.     (Fig.  24,  page  94.) 

As  a  consignment  is  of  a  speculative  nature,  any  profit  should  be  kept 
separate  from  the  regular  trading  profit,  or  the  profit  made  on  buying  and 
selling  in  the  regular  course. 

Tracing  Each  Shipment 

The  goods  consigned  to  one  house  are  shipped,  each  shipment  num- 
bered or  lettered,  and  memo,  bill  marked  with  that  distinguishing  let- 
ter, which  is  also  noted  in  the  debit  on  the  ledger,  and  proceeds  or  check 
from  the  commission  firm  so  indicated  as  received,  that  the  charges  and 
corresponding  credits  may  each  be  checked  off  and  at  a  glance  show  how 
they  stand,  either  a  profit  or  a  loss.  This  makes  the  account  easy  to  check 
and  conclusive  in  results.  (See  Ledger  account,  Bray  consignment  ac- 
count, Fig.  24,  page  94.) 

Bills  Receivable 

To  be  Numbered 

Be  sure  to  number  every  note  received,  usually  starting  at  1  and  con- 
tinuing 2,  3,  4,  etc.,  as  received,  and  use  that  number  in  addition  to  any 
other  description  whenever  the  note  is  entered  as  received  or  paid,  and  by 
this  means,  the  identity  of  each  note  can  be  easily  established  even  though 
there  are  many  notes  of  the  same  amount.  Each  one  would  have  a  differ- 
ent number,  and  as  the  number  also  is  entered  on  the  ledger,  both  when 
debited  and  credited,  a  small  check  against  the  credit  and  corresponding 
debit  in  the  ledger  will  show  those  not  so  ticketed  as  still  unpaid  and 
prove  a  satisfactory  checking  of  the  account. 

Due  Date  to  be  Watched 

Always  enter  on  your  diary  on  the  date  due  of  each  note,  the  number, 
name  of  maker,  and  amount,  that  it  be  not  overlooked  if  not  paid. 


74         BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

Bills  Payable 

The  same  little  book,  termed  a  "  Bill  Book,"  page  165,  used  for  Bills 
Receivable  also,  has  pages  ruled  and  headed  for  record  of  Bills  Payable, 
made  by  you,  giving  date, —  number, —  favor  of, —  for  what, —  time  to 
run, —  when  payable, —  date  due  and  amount  as  shown  in  Fig.  170. 
run,- — when  payable, —  date  due  and  amount.     (Fig.  55.) 


BILLS        PAYABLE 

Date 

No. 

Maker   or  drawer 

Favor    of 

Where 
payable 

Amount 

Time 

Due 

Remarks 

OUh 

Is 

Lmsjui  JrfrvT~£> 

rktMJoWvH 

y>#/c 

Mi* 

l ,Lu 

^Vw-  /te 

7 

i) 

7 

FlG.  55  —  Bill   Book 

These  notes  also  should  be  numbered  and  entered  in  the  diary  on  the 
page  of  date  due. 

If  only  an  occasional  note  is  given  or  a  bill  receivable  taken,  there  is 
no  need  for  a  special  book  of  record,  as  the  ledger  may  then  be  sufficient, 
because  the  note  numbers  are  stated  in  the  entry  on  posting  of  each  one. 

Notes  the  Most  Particular  Class  of  Debts 

Always  bear  in  mind  that  your  notes  are  the  most  important  class  of 
debts  due  by  you,  and  must  be  promptly  paid  when  due. 

They  are  in  this  respect  not  like  debts  due  on  open  account  for  mer- 
chandise, even  though  bought  to  be  paid  on  a  fixed  date. 

Must  be  Paid   Promptly 

Notes  must  be  paid  on  date  promised,  or  your  name  suffers  by  protest. 

Debts  due  for  merchandise  should  be  paid  when  due  and  are  just  as 
sacred,  in  fact,  as  notes  made  by  you,  but  in  the  latter  case  the  exact  date 
of  payment  is  agreed  and  fixed  by  your  written  promise,  while  in  the 
former,    a    day's    delay    docs    not    have    the    same    legal    consequence,* 

A  certain  amount  of  capital  is  necessary  to  carry  on  any  business, 
but  character  is  the  most  valuable  asset  of  a  merchant.  Performance 
not  promises  make  a  reputation,  and  when  experience  has  proved  to  others 
that  his  word  is  as  good  as  his  bond,  he  will  find  fewer  obstacles  to  success. 
The  Golden  Rule  still  sums  up  the  whole  code  of  good  business  and  can- 
not be  improved. 


*  For  the  accounts  as  written  up,  see  Figs.  19  to  29D,  pages  89  to  102. 


CHAPTER   XI 

Robert  Bell  &  Co  's   Books 

IF  we  are  to  follow  the  different  business  transactions  of  Robert  Bell 
&  Co.  during  the  month  of  November,  it  may  be  well  to  put  them  in 
diary  form  or  somewhat  like  the  "  Day  Book,"  which  was  used  many 
years  ago. 

Any  merchant  who  cannot  keep  his  own  books  could  jot  down  the 
daily  transactions  as  below  and  have  some  outside  bookkeeper  come  in  one 
or  two  evenings  each  week  and  write  the  books  up,  which  means  making 
the  entries  in  proper  form,  and  then  posting  to  the  right  accounts;  at  least, 
until  the  merchant  could  master  the  problem  and  do  this  work  himself  or 
have  it  done  by  one  of  his  regular  clerks.  The  Trial  Balance,  page  89, 
had  been  prepared  by  the  bookkeeper. 

The  diary  or  records  made  by  Bell  as  shown  on  the  following  pages 
are  jotted  down  as  they  occur  on  the  left-hand  page  of  an  ordinary  "  day 
book,"  which  may  be  found  in  any  book  store,  stated  in  his  own  way  and 
language  and  later  used  by  the  visiting  bookkeeper  in  writing  up  the 
books.     (See  Figs.  ISA  to  18G,  pages  16  to  82  inc.) 

That  Mr.  Bell  may  be  able  to  understand  where  and  how  these  entries 
have  been  made,  and  check  them  off  if  need  be,  the  bookkeeper  states  on 
the  page  opposite  each  memorandum  of  Bell's  the  book  and  page  of  same 
on  which  the  entry  may  be  found. 

If  the  reader  is  interested  in  following  the  entries  or  wishes  to 
familiarize  himself  with  the  manner  of  entering,  posting,  etc.,  he  will  find 
this  exercise  will  materially  aid  him  in  following  the  accounts,  and  very 
soon  be  able  to  know  where  such  entries  belong  without  depending  on  the 
bookkeeper's  explanation.  As  an  experiment  follow  the  first  two  pages 
of  the  diary,  then  endeavor  to  locate  the  book  and  page  of  the  entries 
which  should  be  made  of  Bell's  next  sheet,  putting  down  on  a  sheet  of 
paper  just  how  you  would  enter  and  then  compare  the  result. 

If  mistakes  are  made  follow  the  entries  of  the  next  page  of  the  diary 
and  the  explanation  and  try  to  properly  locate  the  entries  on  the  page  fol- 
lowing.    Instead  of  being  a  dry  lesson  you  may  find  it  an  interesting  game. 

75 


76 


BOOKKEEPING  AND  BUSINESS  MANAGEMENT 


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ROBERT  BELL  &  CO.'S  BOOKS  83 

Closing  the  Books 

Sales  Book 

The  bookkeeper  is  called  in  to  make  the  closing  entries  as  follows: 
The  Sales  Book  (Fig.  23,  page  91)  is  ruled  up  for  the  month,  footed  in 
ink,  making  a  total  of  $2,226.10  —  this  being  the  total  of  charge  sales 
for  December.  This  amount  is  posted  to  credit  of  sales  in  the  ledger 
(Fig.  24,  Led.  Fol.  24,  page  94)  and  this  ledger  page  number  is  put  in 
the  ledger  folio  column  of  Sales  Book  and  the  Sales  Book  folio  No.  47, 
in  the  ledger. 

Cash  Book 

Ruling  Debit  Side  of  Cash  Book.  (Fig.  21,  page  92.)  — The  Cash 
Book  columns  have  been  footed  daily  in  pencil  as  soon  as  all  entries 
for  each  day  are  in,  so  that  the  figures  can  be  used  in  the  daily  balancing 
of  cash. 

At  the  end  of  the  month  they  now  show  — 
Cash  sales  received  in  December,  of  which  none  has  yet 

been  posted  to  ledger $1 ,187  .  90 

as  only  the  totals  are  posted. 

Paid  to  customers  —  each  amount  posted  as  paid  to  its 

proper  ledger  account 1,281 .  70 

Received  from  other  sources  —  Sundries  —  also  posted  as 

paid  (plus  balance  from  Nov.  30th,  $817.60),  equal.  .  .       1,104.  IS 

The  footing  of  Cash  Sales  is  made  in  ink  just  below  the 

pencil  totals  and  carried  in  ink  over  on  the  same  line  to 

the  Sundry  column. 

The  footing  of  "  Customers  "  in  ink  is  made  on  the  line 

below  and  also  carried  in  ink  to  "  Sundry"  column.  .  . 

These  figures  in  the  "  Sundry  "  column  are  now  added, 

showing  a  total  of $3,573 .  75 

The  interest  column  is  ruled,  totals  made  in  ink  on  the  line 

below,  and  then  carried  in  ink  to  "  Sundries  "  column.  .  .  75 

And  deducted,  because  the  interest  paid  on  Bills  Payable 
was  counted  in,  though  not  received,  and  thus  deducting 

gives  us  the  amount $3,573  .  00 

which  includes  the  "  balance  "  received  at  first  of  month 
from  previous  transactions,  $817.60. 

To  find  the  actual  cash  received  during  the  month,  we 

deduct  this  balance  with  which  we  started,  or 817 .  60 

which  gives  the  exact  amount  of  net  receipts  for  month $2,755 .40 

and  in  the  left-hand  margin,  this  amount  is  placed  for  posting.     (Fig.  21.) 


84         BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

By  carrying  in  a  separate  column  all  interest  deducted  on  loans  by 
bank  or  paid  on  loans,  interest  can  be  totaled  and  posted  in  one  amount 
at  the  end  of  the  month,  instead  of  making  a  journal  entry  each  time,  and 
this  method  saves  much  extra  work. 

The  net  receipts,  $2,755.40,  is  posted  to  the  debit  of  cash  in  the  ledger. 
(Fig.  24,  page  94.) 

Ruling  Credit  Side  of  Cash.     (Fig.  22,  page  93.) 
As  the  columns  show  pencil  footing  — 

Merchandise  bought  for  cash $13 .  12 

not  posted  until  a  total  at  end  of  month. 

Expense  paid  cash 663 .  00 

not  posted  until  a  total  at  end  of  month. 

Sundries  posted,  as  entered,  during  the  month 2,212  .44 

The  several  totals  are  carried  to  the  Sundries  column. 
Merchandise  column  is  ruled,  footed  in  ink  and  carried 

on  same  line  to  Sundry  column. 
Expense  column  is  ruled,  footed  in  ink,  and  carried  to 
Sundry  column  on  line  below,  being  the  Expense  total. 
Then  Sundries  column  is  posted,  showing  a  total  of  Sun- 
dries column $2,SS8 .  56 

Rule  "  Discount  "  column  on  line  below  the  last  footing 

of  Sundry  column $2,888.56 

put  total  in  ink  and  carry  to  Sundry  column  below  the  footing 

of  Sundry  column  and  deduct 36 .  60 

showing $2,851 .96 

footing  of  net  cash  paid  out,  which  total  is  posted  to  credit  of 

cash  account,  "  Cash  paid  in  December."     (Ledger  Fol. 
10,  Fig.  24,  page  94.) 

The  balance  between  the  credit  side  or  cash  received $3,573  .  00 

and  the  debit  side  or  cash  paid 2,851 .96 

shows  the  balance  of  cash  on  hand $7 2 1 .  04 

which  is  put  in  ink  under  the  "  Total  Paid  "  column,  and  then  footed. 

This  total  should  equal  the  total  of  credit  side  or  be  "  in  balance." 
The  Balance  of  Cash  is  then  placed  on  first  line,  under  the  ruling  of  the 
month's  receipts  on  the  debit  side  in  both  the  Sundries  and  "Amount 
Received  "  Columns,  ready  for  the  next  month's  work. 

At  the  end  of  the  month  the  cash  balance  shown  by  the  Cash  Book 
should  agree  with  the  balance  as  shown  by  the  ledger  account  of  cash. 

The  Discount  total,  $36.60,  being  amount  received  during  the  month, 
is  deducted  and  to  be  posted  to  the  credit  of  Discount  in  the  ledger.     This 


ROBERT  BELL  &  CO.'S  BOOKS  85 

column  proves  of  the  same  convenience  as  the  Interest  column  on  debit  side, 
in  avoiding  extra  work. 

As  the  Merchandise  payments  were  not  posted  during  the  month,  the 
total,  $13.12,  is  now  posted  to  Merchandise  ledger  account  on  ledger 
folio  18  (Fig.  24,  page  94),  and  for  same  reason,  Expense  total  is  posted 
to  Expense  Ledger  account.     (Fol.  34,  Fig.  24,  page  94.) 

The  sundries  paid  out  are  posted  daily  and  at  end  of  month  need  no 
further  posting. 

Bills  Payable 

The  full  credit  to  Bills  Payable  of  the  face  of  the  note  should  be 
entered  on  the  Cash  Book,  because  that  amount  should  stand  on  the  ledger 
as  the  amount  due,  and  as  only  the  proceeds,  in  the  case  $149.25,  are  given 
by  the  bank,  by  being  entered  in  the  pass  book  as  available  for  use,  the 
interest  is  placed  in  a  separate  column  as  noted,  and  being  a  charge,  must 
finally  be  debited  to  interest  account. 

Discounts 

The  discount  deducted  from  remittances  for  goods  bought,  is  a  gain 
and  must  be  credited  to  Discount  account,  and  the  full  amount  of  the  bill 
charged  when  paid. 

Proving   Footings   of   Cash   Book 

At  all  times  the  correctness  of  the  footings  of  cash  can  be  proven, 
because  the  total  cash  sales  received  and  amounts  paid  by  customers  and 
Sundries  should  equal  the  footing  of  the  amount  received  column,  unless 
there  is  deduction  for  interest  paid,  in  which  event  the  total  received  must 
be  added  to  that  column's  footing  to  equal  the  other  three. 

The  same  rule  holds  good  with  the  credit  side. 

Cash  Balance  Shown  by  Cash  Book 

The  figures  of  the  amount  on  hand,  or  the  balance  at  the  end  of  pre- 
vious month  are  placed  in  the  "  Sundries  column  "  and  "Amount  Re- 
ceived "  column  on  the  debit  side,  that  the  footings  made  later  will  agree 
in  the  proof.  At  any  time  cash  is  balanced  during  the  month,  the  differ- 
ence between  the  footings  of  Amount  Received  and  Amount  Paid  columns, 
should  be  the  total  cash  on  hand,  or  currency  in  the  drawer  and  amount  of 
bank  balance  as  shown  by  the  check  book,  to  make  this  total  on  hand. 


CHAPTER   XII 

Closing  Entries  (Fig.  28,  page  99.) 

AFTER  all  the  current  posting  lias  been  finished  it  is  customary  to 
take  off  a  trial  balance  (Fig.  27,  page  9S),  or  a  list  showing  all 
debit  balances,  and  all  credit  balances,  which  when  footed  should 
equal,  showing  that  the  books  balance  and  all  entries  have  been  properly 
posted. 

Profits  Other  Than  Trading 

Next,  all  other  revenue  accounts,  as  Bray  Consignment  a/c,  are  bal- 
anced by  debiting  them  and  crediting  the  respective  balances  to  Profit  and 
Loss  account,  because  the  gain  or  profit,  made  on  such  an  account  is  not  in 
buying  and  selling  goods  in  the  course  of  your  regular  business,  but  as  in 
this  case,  a  speculative  venture  which  may  result  in  loss  instead  of  profit. 

Taxes 

Then  Tax  account  is  examined,  and,  as  the  taxes  or  license  for  doing 
business  in  many  cities  are  assessed  at  beginning  of  the  year,  the  tax  is  paid 
ami  charged  "  Taxes,"  and  the  account  gradually  reduced  each  month  by 
charging  to  expense  or  some  proper  account  one-twelfth  of  the  year's  license 
and  crediting  license  or  taxes.  If  taxes  are  only  paid  at  end  of  year  for 
the  year  past,  then  a  certain  estimated  amount  usually  based  on  the  bill  of 
year  previous,  is  to  be  provided,  which  will  at  end  of  year  apply  on  liqui- 
dating the  tax  hill.  To  accomplish  it  one-twelfth  of  the  estimated  yearly 
tax  is  charged  taxes  at  end  of  each  month,  and  credited  to  an  account 
usually  termed  "Reserved  for  Taxes''  or  "Taxes  Accrued,"  and  to 
this  account  is  charged  the  tax  bill  when  paid. 

In  the  present  case  we  are  using  up  a  sum  paid  at  the  beginning  of 
the  year  which  has  been  reduced  monthly  until  now  it  amounts  only  to 
$7.60,  or  one  month's  proportion. 

Insurance  and  Interest 

We  find  that  of  the  insurance  in  force,  ?5.2S,  or  one-twelfth  of  pre- 
mium, is  due  or  used,  so  we  charge  that  amount  to  expense  and  credit 
insurance.     We  charge  off  balance  paid  for  interest,  75  cents. 

86 


CLOSING  ENTRIES  87 

Depreciation 

We  estimate  20%  depreciation  on  Dray  Stock,  or  wagons,  harness  and 
horses,  as  just,  and  we  charge  that  to  Expense,  crediting  Dray  Stock  to 
reduce  the  value  $93.00. 

In  the  larger  cities  auto  trucks  are  rapidly  displacing  horse-drawn 
vehicles,  and,  in  the  estimation  of  auto  insurance  companies,  are  subject 
to  a  larger  rate  of  depreciation. 

Furniture  and  fixtures  have  a  fixed  depreciation  of  10%  in  our  judg- 
ment, hence  we  charge  10%  of  the  balance  to  Expense  and  decrease  furni- 
ture and  fixtures  balance  that  amount,  $78.03,  by  a  credit  to  Furniture 
and  Fixtures.  The  credit  to  Dray  Stock  and  Furniture  and  Fixtures  of 
amount  depreciated,  is  an  allowance  on  those  accounts  because  they  had 
shown  wear  and  tear  and  were  not  as  good  as  they  were  the  year  before. 

This  is  similar  to  allowing  a  customer  a  certain  sum  because  the 
goods  sold  him  later  proved  defective,  or  depreciated  in  quality  while  in 
our  stock. 

In  both  cases  it  is  an  allowance  or  loss  and  must  have  a  credit  — 
which  amount  must  also  be  debited  to  some  other  account,  and  in  case  of 
Dray  Stock  and  Furniture  and  Fixtures,  charged  to  Expense. 

Reserve   for   Bad   Debts 

We  wish  to  provide  against  erroneous  valuation  of  accounts  receiv- 
able, which,  before  collection  of  all,  may  show  some  failures  or  unfore- 
seen claims,  so  we  decide  that  2%  on  the  balance,  $2,672.20  outstanding, 
is  about  correct  and  open  an  account  "  Reserved  for  Bad  Debts,"  and 
charge  expense  2%,  $53.44,  and  credit  the  amount  to  Reserve  for  Bad 
Debts.  In  case  of  failures  the  loss  is  to  be  charged  to  this  account, 
"  Reserve  for  Bad  Debts,"  and  credited  the  customer  who  has  failed  to 
close  his  account  on  the  books,  or  wipe  out  the  account. 

Interest  on  Capital 

We  must  compensate  the  principals  for  the  use  of  their  capital,  so  6% 
interest  for  the  year  is  credited  Bell  on  his  $5,000.00  and  Davis  on  his 
$1,000.00,  and  these  amounts  $300  and  $60,  respectively,  are  charged 
Profit  and  Loss. 

For  these  entries,  see  entry  "  PROFIT  AND  LOSS,"  to  Sundries  on 
Journal.     (Fig.  28,  page  96.) 


88         BOOKKEEPING  AND  BUSINESS  MANAGEMENT 
Trading  Account  (Fig.  29B,  Led.  Foi.  19,  page  101.) 

What  is  It? 

The  account,  now  used  conveniently  to  show  the  results  of  the  business 
dealings,  is  called  Trading  Account,  and  may  be  likened  to  choosing  some 
agent  or  mutual  friend  to  whom  you  hand  all  bills  for  your  expenses  and 
bills  for  merchandise  bought,  and  also  the  proceeds  of  the  sales,  with  the 
understanding  that  he  will  pay  what  is  due  and  hand  you.  the  balance, 
which  is  profit. 

The  balance  shown  by  Merchandise  Account  is  charged  to  Trading 
Account  and  credited  to  Merchandise.     (Fig.  28,  5th  entry,  page  99.) 

The  balance  shown  by  Expense  account  is  credited  Expense  and 
debited  Trading  Account,  thereby  balancing  Merchandise  and  Expense 
Accounts,  which  are  ruled  up.     (Figs.  28,  page  99  and  29B,  page  101.) 

The  balance  of  Sales  Account  is  charged  Trading  Account  and  cred- 
ited Sales,  thereby  balancing  the  latter  account.     (Figs.  28  and  29B.) 

Discount  Credited  to  Profit  and  Loss 
The  balance  of  Discount  Account,  and  Bray  Consignment  Account 
are  closed  out  to  Profit  and  Loss  Account,  because  they  are  profits  on  cash 
in  hand,  and  not  on  trading  in  goods.     (Figs.  29B,  page  101  and  29A, 
page  100.) 

Closing  Merchandise  and  Trading  Accounts 
We  await  the  completion  of  pricing,  extending  and  footing  the  inven- 
tory, when  finished  showing  goods  on  hand. 

We  charge  Merchandise  with  that  amount,  showing  goods  on  hand, 
and  credit  Trading  Account,  because  when  we  charged  the  total  balance 
standing  to  the  debit  of  Merchandise  for  goods  bought,  including  what 
was  used  for  sales  and  also  the  balance  still  unsold  or  what  is  still  on 
hand,  we  credit  Trading  Account. 

This  would  have  been  the  same  as  crediting  to  Merchandise  in  the 
first  place,  the  amount  of  goods  used,  which  could  be  calculated  by  deduct- 
ing the  amount  unused  from  the  total  balance  of  Merchandise,  and  charg- 
ing this  difference  or  balance  used,  to  Trading  Account.  The  method 
shown  allows  the  books  to  be  closed  thus  far  and  await  the  results  of  the 
inventory.     (See  Figs.  28,  page  99  and  43,  page  140.) 

Trading  Profits 
A  balance  is  now  struck  in  Trading  Account  and  this  balance  (in  this 
instance,  $3,063.76)  credited  to  Profit  and  Loss,  showing  Trading  Profits 
for  the  year,  and  Trading  Account  is  then  ruled  up  as  balanced.     (Figs. 
28,  page  99;  29A,  page  100;  29B,  page  101.) 


CLOSING  ENTRIES 


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Fig.  19  —  Trial  Balance  (Set  2)  to  Begin 


90 


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You  will  note  that  the  above  ruling  separates  the  General  Accounts 
from  the  Customers'  Accounts,  though  this  form  need  not  necessarily  be 
used,  unless  the  reasons  below  appeal  to  you. 

If  at  any  time  it  is  desirable  to  prove  up  the  trial  balance,  the  col- 
umns of  both  classes  of  accounts  are  footed,  debits,  and  credits  and  to  the 
debits  and  credits  of  the  other  books  which  have  been  footed  are  added 
the  respective  amounts  which  will  show  the  total  debits  and  credits  which 
have  been  posted  during  the  month.  As  your  preceding  trial  balance 
showed  the  total  debit  of  customers  you  add  that  debit  to  total  customers' 
debit  footings  and  deduct  the  total  credit  footings,  which  gives  the  debit 
total  of  Customers'  Accounts,  thus  checking  if  correct  or  showing  a  differ- 
ence if  an  error  has  been  made.  Eikewise  the  General  Accounts  can  be 
proven. 

The  writer  has  been  able  on  many  occasions  to  prove  in  which  class 
of  accounts  an  error  has  been  made  and  consequently  know  which  class 
to  check  for  the  error. 


CLOSING  ENTRIES 


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Fig.  23 
As  the  same  transactions  occur  in  both  Sets  2  and  3  — -  the  customers' 
accounts  in  both  are  the  same,  hence  Fig.  35,  page  128  is  similar  to  Fig.  23 
except  that  the  ledger  page  is  different,  see  Fig.  24  in  Set  2,  page  94 
and  Figs.  41A,  B,  and  C  in  Set  3,  pages  132  to  134. 


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94         BOOKKEEPING  AND  BUSINESS  MANAGEMENT 


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FlG.  24  — Ledger  (Set  2)  Accounts 


i 


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I'ii,.  25 —  Ledger  —  Accounts   Payable — Set  2 


It  is  not  only  good  business,  but,  when  possible  to  do  so,  you  should 
pay  each  bill  for  goods  bought  or  if  many  small  bills  are  open,  pay  up 
evenly  and  leave  no  part  of  any  one  bill  unpaid,  and  then  rule  the  account 
up  under  the  completed  payment,  leaving  unruled  the  balance  or  unpaid 
bill  or  bills  — 

First  —  It  is  very  easy  to  notice  at  a  glance  the  balance  and  amount 
as  the  column  is  short,  which  is  not  the  case  if  both  sides  have  a  long 
column  of  both  credits  and  debits  —  note  Edgar  Dry  Goods  Co.  account, 
but  one  bill  stands  out  as  unpaid  —  those  paid  are  ruled  up. 

Second  —  The  seller  appreciates  the  advantage  of  ruling  up  your 
account  on  his  books  so  that  he  can  easily  note  what  is  owing.  Do  not 
leave  unsettled  balances.  The  details  are  often  forgotten  or  must  be  looked 
up.  The  calculation  of  what  has  or  what  has  not  been  paid  must  be 
checked  and  time  lost  in  such  work  needlessly,  unless  it  is  inconvenient  to 
pay  to  a  given  point.  In  that  case  pay  off  the  balance  as  soon  as  possible 
and  rule  up  the  ledger  to  the  balancing  point:  — 

'"  Prompt  payment  makes  fast  friends." 


96         BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

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Fig.  27 — -Trial   Balance   before   Closing  —  Set  2 

This  is  the  "  Trial  Balance  before  Closing  "  or  the  trial  balance  to 
prove  the  correctness  of  all  postings  and  footings  of  the  books  before  mak- 
ing the  closing  entries.  Unless  this  is  taken  off  properly  and  shows  both 
sides  in  balance,  no  attempt  should  be  made  to  close  the  books  for  the  year. 

Some  bookkeepers  force  a  balance  by  opening  an  "  error  account," 
to  which  they  post  the  amount  to  make  the  two  sides  agree,  but  it  is  well 
known  to  any  old  bookkeeper  that  a  seemingly  small  error  in  his  trial 
balance  may  be  the  difference  of  two  or  a  dozen  errors  made,  and  no 
dependence  is  placed  on  that  difference  being  only  one  error.  A  book- 
keeper who  uses  an  "  error  account  "  to  reconcile  his  books  is  unworthy 
the  confidence  of  his  employer  —  only  honest  and  patient  work  will  detect 
an  error,  and  a  lazy  man  is  neither  patient  nor  thorough. 


CLOSING  ENTRIES 


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no  other  entries  allowed  to  go  on  the  page. 

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Rather  err  in  writing  too  much  of  an  explanation  than  leave  the 
meagre  details  to  be  later  unraveled  by  some  unfortunate  successor. 

Nothing  is  more  confusing  and  irritating  than  the  absence  of  the  why 
and  wherefore. 


100       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 


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102       BOOKKEEPING   AND  BUSINESS  MANAGEMENT 


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CLOSING  ENTRIES  103 

Profit  and  Loss  Accounts 

Dividing  Profits 

Profit  and  Loss  having  been  credited  with  gain  from  Discounts,  bal- 
ance Bray  Consignment  Account,  and  balance  of  Trading  Account,  is  now 
to  be  divided  as  the  interest  of  the  proprietors  may  be.  Their  accounts 
are  credited  (in  this  case),  Bell,  five-sixths  and  Davis,  one-sixth,  and 
Profit  and  Loss  debited  the  total,  or  $2,796.25.  (Figs.  28,  page  99;  29A, 
page  101.) 

Profit  and  Loss  account  is  then  ruled  up  and  the  books  ready  for  the 
next  year's  business. 

Ruling  Up  Ledger  at  Close  of  Year 

All  general  accounts  showing  more  than  one  entry  for  the  year  are 
ruled  up  in  red  ink  and  the  balance  brought  down  as  shown,  at  the  end  of 
the  year.  Customers'  accounts  are,  if  paid  by  even  bills,  simply  ruled  at 
the  point  where  the  account  balances,  and  the  unpaid  bills  are  left  open 
and  in  small  figures  footing  in  pencil  made  under  those  bills.  If  bills 
are  not  so  paid  the  balance  in  pencil  figures  is  entered  near  the  date  column 
on  the  side  which  is  larger,  and  left  plainly  written  to  be  entered  in  the 
Trial  Balance. 

Posting 

Remember  to  put  in  the  posting  column  or  ledger  folio  space,  the  page 
number  of  the  ledger  as  posted,  and  in  the  ledger  the  page  number  of  the 
book  from  which  the  entry  is  taken. 

Check  that  Posting  be  not  Overlooked 

As  certain  entries  on  the  cash  are  not  posted  daily,  as  occurring,  but 
by  totals  at  the  end  of  the  month,  such  as  Cash  Sales,  Merchandise, 
Expense,  Interest  and  Discount,  a  cross  (X)  or  tick  (V)  mark  is  made  in 
the  ledger  folio  space,  to  note  that  they  have  not  been  overlooked.  When 
the  posting  figures  of  such  other  accounts  have  been  placed  in  this  column, 
every  entry  will  have  some  special  mark  opposite,  either  folio  figures  or 
check  (V)  mark,  and  if  not,  that  entry  has  been  overlooked  and  failed  of 
having  been  posted.  Hence  at  a  glance  this  posting  column  would  dis- 
close any  omission. 


104       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

Another  Way  to  Prove  Trading  Account 

The  sales $30,959 .  80 

Less  goods  returned 2  .  00 

are  gross  sales  for  year $30,957  .80 

Mdse.  ledger  balance  is $25,363.44 

Less  inventory,  Dec.  30,  1916.  .       4,186.62 
Deduct  this  amount,  or  Mdse. 

used  for  sales 21,176.82 

from   sales,    which    shows   difference,    or 

Gross  Trading  Profit $9,780.98  31.60%  of  sales 

Then  deduct  expenses 6,717.22    21.70%  "     " 

Giving  a  net  Trading  Profit.     (Fig.  29A)  . .    $3,063.76     9.90%"     " 
But, 

we  must  also  add  profit  on  dis- 
count (Fig.  28,  page  99).  $36.60 
and  profit  on  Bray  Consign- 
ment (Fig.  29B,  page  101)  55.89 

92.49 

$3,156.25 
and  deduct  the  amount  of  interest  paid 

on  capital  (Fig.  28,  page  99) 360.00 

showing  total  net  profits  for  year $2,796 .25      9.03%  of  sales 

using  above  figures, — 

Divide  Gross  Profits,  $9,780.98,  by  sales,  $30,957.80,  we  have 
31.60%  of  sales. 

Divide  Gross  Expenses,  $6,717.22,  by  sales,  $30,957.80,  we  have 
21.70%  of  sales. 

Divide  Net  Trading  Profits,  $3,063.76,  by  sales,  $30,957.80,  we  have 
9.90%  of  sales. 

Divide  Total  Net  Profits,  $2,796.25,  by  sales,  $30,957.80,  we  have 
9.03%  of  sales. 

If  the  above  were  the  results  of  last  year's  business,  it  would  be  per- 
fectly proper  in  expressing  those  results  to  say  last  year's  expenses, 
$6,717.22,  plus  interest  on  capital,  $360.00,  equals  $7,077.22,  were 
22.86%  of  sales. 

and  the  net  profit  was  9.03%  of  sales. 

If  interested  in  knowing  the  percentage  of  Department  Profits  and  Ex- 
penses, which  is  always  an  excellent  idea,  for  comparison, 


CLOSING  ENTRIES  105 

divide  the  expenses  of  each  department  by  the  sales  of  that  department, 

to  find  the  department  expense  percentage,  and 
divide  the  profit  of  each  department  by  sales  of  that  department,  to  find 

the  department  profit  percentage ; 
thus  —  by  reference  to  Trading  Account   (Fig.  46,  page  144): 

Dept.  A  —  Expenses,  $3,341.86,  divided  by  sales,  $15,163.18  =  22.047° 
Profits,       $1,235.01,  divided  by  sales,  $15,163.18=    8.14% 

Dept.  B  —  Expenses,      $872.41 ,  divided  by  sales,     $4,343.60  =  20.09% 
Profits,  $557.40,  divided  by  sales,     $4,343.60=-  12.83% 

Dept.  C  —  Expenses,  $1,033.05,  divided  by  sales,     $4,567.89  =  22.61% 
Profits,  $465.96,  divided  by  sales,     $4,567.89  =  10.20% 

Dept.  D  —  Expenses,  $1,469.90,  divided  by  sales,     $6,883.13  =  21.367° 
Profits,  $805.39,  divided  by  sales,     $6,883.13  =  11.707° 

or,  Total     Expenses,  $6,717.22,  divided  by  sales,  $30,957.80  =  21.707° 
Profits,     $3,063.76,  divided  by  sales,  $30,957.80=    9.907° 

In  above  we  have  a  higher  average  percentage  of  expenses  in  Depart- 
ment A  (Groceries),  which  may  be  explained  by  the  usual  waste  or  spoil- 
age, and  a  lower  percentage  of  net  profits,  possibly,  because  many  staples 
are  sold  on  a  close  margin,  as  usual.  Should  we  pursue  the  matter  further 
and  wish  to  know  how  the  percentages  of  "  Wages,"  "  Rent,  Light  and 
Heat,"  or  General  Expense  compare  by  department,  we  pursue  a  similar 
course,  as  our  figures  are  ready  at  hand  in  the  Trading  Account. 

Comparison  by  percentage  is  the  best  and  safest  method,  and  so 
conceded  by  all  authorities. 

When  figuring  selling  prices  for  the  following  year,  with  an  expected 
Net  Profit  of  107°  —  add  the  107°  to  22.86,  making  32.86,  but  for 
convenience  make  the  figures  33%  —  which  percentage  must  be  paid  on 
every  sale  to  cover  expenses  and  return  a  profit  as  above. 

The  figures  then  would  be  100%  of  selling  price, 

from  which  deduct  expenses  and  profits,    33%  of  selling  price, 
the  remainder,  cost  of  goods,  677°,  in  every  sale. 

To  fix  the  selling  price  of  a  hat  for  which  you  paid  $2.00,  we  know 
that  2.00  is  677°  of  selling  price  to  be  obtained.     $2.00  divided  by  67 
gives  one  per  cent,  or  2.99  cents,  and  if  one  per  cent  of  sale  price  is  2.99 
cents,  1007°,  or  100  times  2.99  cents,  is  $2.99,  or  in  even  figures,  $3.00. 
Proof  — 

Cost  of  hat $2.00 

237°  of  $3.00  sale  is 69  for  expenses. 

107°  of  $3.00  sale  is 30  for  profit. 

Total $2.99  selling  price. 


106       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

Do  not  Sell  Below  Cost 

Some  goods,  such  as  many  staples,  must  be  sold  at  close  figures,  but 
should  never  be  sold  below  cost  and  expenses,  for,  in  that  case,  you  are 
paying  some  customer  for  the  privilege  of  selling  him. 

Other  goods  may  net  an  excellent  profit,  but  the  plan  should  be  never 
to  sell  below  cost  and  expenses,  unless  damaged  goods,  etc.,  and  rely  upon 
the  other  goods  bringing  up  the  average,  because  the  great  demand  and 
majority  of  goods  sold  in  a  general  store  are  staples,  every-day  necessities, 
the  great  reliance  in  making  some  profit. 

This  is  no  place  to  enlarge  upon  selling  or  store  management,  as  books 
and  magazine  articles  on  these  subjects  have  appeared  in  great  numbers 
and  can  be  readily  procured. 

Trade  Journals  and  Books  on  Business 

The  best  advice  is  to  secure  two  or  three  standard  works  on  such  sub- 
jects, subscribe  to  at  least  two  trade  journals,  to  compare  the  contributors' 
opinions,  read  and  stud}'  them.  No  such  journals  would  be  pub- 
lished unless  the  demand  justified  their  extensive  publication,  and  their 
circulation  reaches  only  the  merchants  who  wish  to  improve  in  their  chosen 
calling. 

As  a  proof,  pick  out  the  most  successful  men  you  may  have  in  mind, 
and  ask  them  if  they  subscribe  to  any  trade  journals,  and,  if  so,  why? 
The  answer  may  open  your  eyes,  if  by  chance  you  happen  to  be  one  who 
does  not  enjoy  that  privilege. 


CHAPTER    XIII 

Organizing-  Set  2  into  Departments  as  Set  3 

WE  have  gone  into  detail  in  Robert  Bell  &  Co.'s  set  of  books 
and  now  will  take  up  the  same  transactions  with  same  parties, 
but  do  so  under  the  supposition  that  the  firm  name  is  changed 
to  Bell  &  Davis,  for  distinction,  and  that  the  partners  at  the  beginning  of 
the  year  had  studied  the  question  of  department  accounts  and  concluded 
to  operate  under  that  system,  and  learn,  if  possible,  which  branch  of  their 
business  proved  most  profitable,  and  which,  if  any,  was  not  productive. 

The  set,  arranged  to  show  department  results,  is  of  Bell  &  Davis,  to 
distinguish  from  Robert  Bell  &  Co.,  and  the  same  customers'  ledger 
accounts  the  customers  of  Robert  Bell  &  Co.  (Figs.  26A,  page  96;  26B, 
page  97  )  will  be  used  in  this  set,  as  they  are  not  affected  by  the  change, 
only  the  general  accounts  change. 

Laying  Out  Departments 

The  departments  appearing  easiest  to  define  in  Bell's  opinion  were  — 

A,  Groceries,  or  everything  used  as  food  for  or  consumed  by 

man  or  beast ; 

B,  Dry  goods,  all  adornment,  material  for  clothing,  except  men's 

furnishings,  shoes,  and  men's  and  boys'  hat*; 

C,  Shoes,  hats  for  men  and  boys,  men's  furnishings,  including 

underwear,  and  clothing; 

D,  Hardware,  including  house  and  kitchen  utensils,  furniture 

and  agricultural  implements. 

Merchandise  now  Stock  A,  B,  C,  D 

Instead  of  all  stock  bought  for  sale  being  in  one  account,  Merchan- 
dise, we  divide  it  into  four,  Stock  A,  Stock  B,  Stock  C,  and  Stock  D,  to 
be  the  accounts  representing  goods  bought  for  the  respective  departments, 
so  lettered. 

The  inventory  is  prepared  and  taken  with  this  end  in  view  and  all 
goods  are  listed  for  each  department  on  its  separate  set  of  sheets,  that  the 
amount  of  stock  of  that  class  may  be  accurately  known. 

107 


108       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

Department  Inventory 

The  only  difference  in  taking  the  department  inventory  from  that  of 
any  general  stock  is  that  the  goods  are  listed  all  of  a  class  by  themselves 
or  on  their  own  sheets,  and  not  mixed  by  having  some  goods  of  two  or  more 
departments  on  any  sheet.     (Fig.  14,  page  SO.) 

The  inventory  resulted  as  follows,  and  purchases  up  to  Nov.  30, 
1916,  are  stated,  and  >o  appear  on  the  trial  balance,  with  which  we  start: 
(Figs.  32A  and  41A.) 

Dept.  A     Inventory,  1/1/16..     $2,218.40 
Purchases  from  1/1 

toll/30/16 9,981.68 

-$12,200.08,  bal.  11/30, StockA 

3,082.24,    "         "         "     B 


Dept.  B     Inventory,  1/1/16..        $415.75 
Purchases  since...  .       2,666.49 


Dept.  C    Inventory,  1/1/16..        $464.61 
Purchases  since. ...       3,111.22 


Dept.D     Inventory,  1/1/16..        $869.04 
Purchases  since..  .  .       4,282.84 


3,575.83, 


5,151.88,    "         "         "     D 


Total  amount  of $24,010.03 

standing  as  debit  balances  to  stock. 

All  purchases,  sales  and  expenses  are  kept  by  departments,  necessi- 
tating four  accounts  for  each,  as  will  appear  later,  because  we  must  keep 
all  debits  and  credits  of  each  department  separate  to  arrive  at  results. 

The  goods  bought  and  freight  on  these  goods  are  easily  distinguished 
and  can  be  charged  direct,  each  to  its  own  particular  department.  (See 
Voucher  Record,  Fig.  38,  page  130.) 


Wages  and  Expenses  Apportioned 

Wages  can  also  be  apportioned,  but  general  or  miscellaneous  expense, 
rent,  light  and  heat  accounts  can  only  be  segregated  at  end  of  month  by 
percentage;  in  this  case  we  divide  as  follows:  (Fig.  39,  page  135.) 

Dept.  A.  50     7°  of  all  expenses  not  otherwise  apportioned. 

Dept.  B.  12^2%  of  all  expenses  not  otherwise  apportioned. 

Dept.  C.  ISYif0  of  all  expenses  not  otherwise  apportioned. 

Dept.D.  22     %  of  all  expenses  not  otherwise  apportioned. 


ORGANIZING  SET  2  INTO  DEPARTMENTS  AS  SET  3     109 

"  Rent,  Light  and  Heat  "  expense  is  totaled  and  at  the  end  of  month 
charged  in  one  account  for  convenience,  and  then  by  journal  entry  this 
general  account  is  closed  by  charging  each  its  proportion.  (See  Journal, 
Figs.  34,  page  129;  43,  page  140.) 

Rent,  Light  and  Heat,  Dept.  A 

Rent,  Light  and  Heat,  Dept.  B 

Rent,  Light  and  Heat,  Dept.  C 

Rent,  Light  and  Heat,  Dept.  D 

and  general  expense  is  also  handled  in  this  method. 

This  apportionment  takes  but  a  few  seconds'  figuring  and  can  be  put 
in  the  books  with  other  monthly  figures  and  soon  grows  into  a  most  inter- 
esting comparison. 


Voucher  Record 

What  is  Voucher  System?      (See  Figs.  38A  and  B,  pages  130  and  131.) 

In  this  set  we  use  a  voucher  system  which  is  nothing  more  than  enter- 
ing up  each  bill  to  be  paid  in  a  simple,  logical  manner,  as  soon  as  the  cor- 
rectness of  the  bill  is  established.     Instead  of  folding  the  bill  and  writing 


BELL  and  DAVIS,    -  Dr. 
V7,    C^ru^s\^>    Jr  rXsL^  ^tJUM 


I 


£l, 


/2i. 


c/Y?t 

sr^c," 

DATE 

PARTICULARS 

AMOUNT 

f6i^ 

2o 

Av  fWV- '"-ti  -       £«    -     /'& 

h 

*\»Ze£ 

/ 

s.t-AcJvM     2?^  j  j 

?£*.   *AJ    l0/.                        <rV  2- 

\  3  2-  <=>  7/" 

Ents«d                                                                                                            I        Aj 

/£W*-/£yy, 

DISTRIBUTION 


i/nTT/i  <?L 


fr 


m> 


RECEIVED  OF  BELL  and  DAVIS      oO-g-e^-^cP  n 

IN  FULL  OF  ABOVE  ACCOUNT. 


-^fc^l^ 


^-/U»A 


fy/rrrLiti.  Or /a* 


V 


Fig.    30  —  Voucher. 


110       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

on  the  back  the  name,  date  and  amount  as  our  grandfathers  did,  and  plac- 
ing in  a  pigeon  hole  to  be  remembered  if  it  so  happened,  or  to  be  rudely 
reminded  by  a  sight  draft  that  we  had  forgotten  its  existence. 

Blank  Voucher 

A  uniform  blank  is  used,  on  which  is  written  the  name  of  the  seller, 
or  to  whom  to  be  paid;  the  date;  a  brief  description  such  as  Invoice, 
Groceries,  Dry  Goods,  etc.,  the  amount  to  be  paid,  the  terms,  discount, 
if  any,  and  the  signature  of  the  clerk  who  makes  it  out,  in  space  marked 
"  Correct."     (See  illustration  on  page  109.) 

This  voucher  is  of  convenient  size,  the  entries  or  written  matter  in 
uniform  arrangement,  and  can  be  examined  quickly. 

When  a  bill  or  invoice  is  received  a  rubber  stamp  impression  i  Fig. 
5,  on  page  25)  is  made  on  the  bill,  compared  with  purchase  order  or 
requisition  (  Fig.  17-B,  page  70),  and  held  for  arrival  of  goods. 

Making  Out  Voucher 

When  goods  are  received  the  proper  notation  in  spaces  of  rubber 
stamp  are  made,  and  in  space  "  Charge  "  the  department  letter  placed,  if 
known,  and  then  entered  up  on  a  blank  voucher.  The  clerk,  after  mark- 
ing it  correct,  then  hands  voucher  and  bill  vouched  to  the  party  authorized 
to  approve  the  voucher  ( in  this  case  Mr.  Bell).  If  the  bill  is  one  of  man} 
small  bills  bought  locally,  these  bills  may  be  held  until  the  15th  and  then 
listed  on  one  voucher  blank,  totaled  and  paid  in  one  amount,  and  again, 
on  the  31st  all  bills  of  that  house  bought  since  the  15th. 

This  does  not  apply  when  bills  are  of  large  amounts. 

Marking   Bills    Vouched   and    Filing   Same 

The  bills  from  which  voucher  is  made  are  marked  with  date  the 
voucher  is  made,  and  number  of  voucher,  and  then  filed  in  a  vertical  file 
under  proper  letter,  or  in  some  other  suitable  place.  In  some  houses  the.-e 
bills  are  pasted  on  a  sheet  of  a  manila  scrap  book,  using  one  sheet  for  each 
house  from  whom  you  buy,  so  that  all  bills  from  that  house  will  be  together 
and  following  each  other  by  date.  Some  use  a  loose  leaf  invoice  book  of 
manila  leaves,  and  being  loose  leaf,  allows  the  insertion  of  extra  leaves 
at  any  part  of  the  book,  should  the  other  sheets  be  filled.  There  are  many 
advantages  in  keeping  the  invoices  of  each  house  together  for  quick  refer- 
ence and  if  no  price  book  is  kept,  to  facilitate  pricing  the  inventory,  or 
refreshing  the  memory  on  any  occasion,  it  is  very  valuable  as  a  time  saver. 

In  many  large  concerns,  the  bills  vouched  are  permanently  attached 


ORGANIZING  SET  2  INTO  DEPARTMENTS  AS  SET  3     111 

to  the  voucher  that  they  may  be  examined  quickly  when  examination  is 
made  by  an  outside  auditor  —  though  in  small  houses  this  may  be 
unnecessary. 

Entering  Vouchers 

The  voucher,  when  approved,  is  entered  in  the  Voucher  Record,  using 
one  line  (Fig.  38,  page  130)  and  the  voucher  numbered,  using  the  num- 
ber, on  the  line  as  shown  by  Register. 

Ready  for  Payment 

These  vouchers  are  then  ready  for  payment,  and  if  not  due,  a  brief 
pencil  memo,  made  on  due  date  in  the  diary  of  voucher  number,  name  of 
creditor  and  amount.  If  the  bank  account  may  warrant  discounting  this 
bill,  a  memo,  is  made  in  the  diary  on  date  to  be  remitted. 

Distributing  and  Posting 

On  the  Voucher  Record  the  total  amount  of  voucher  is  entered  in 
column  "Amount,"  and  also  in  any  of  the  other  columns  to  which  it  is  to 
be  charged.  "  Sundries  "  is  any  account  not  named  in  heading  of  a  regu- 
lar column  and  these  amounts  must  be  promptly  posted  to  the  account 
named  in  the  voucher.  Wages  is  distributed  from  pay  roll  on  the  voucher 
when  made  and  after  wages  entered  in  Amount  Payable  column,  must  be 
entered  each  proportion  as  mentioned,  in  its  respective  column.  The  other 
columns  have  their  respective  amounts  entered  in  like  manner. 

The  accounts  in  Sundries  column  having  been  posted  as  occurring,  the 
totals  only  of  the  regularly  headed  columns  are,  at  the  end  of  month,  after 
ruling,  posted  by  debiting  totals  to  their  respective  ledger  accounts,  and  the 
total  of  "Amounts  Payable  "  column  credited  to  Vouchers  Audited. 

This  last  account  will  always  show,  by  balancing  in  pencil,  the  amount 
of  vouchers  unpaid,  which  may  be  verified  by  listing  the  unpaid  vouchers, 
in  the  safe,  which  total  amount  should  agree  with  ledger  balance  of  Vouch- 
ers Audited. 

Ruling  Voucher  Record 

The  Voucher  Record  is  usually  ruled  up  as  per  (Fig.  38,  page  130) 
to  bring  all  column  footings  in  "  Sundries  "  column,  and  after  new  foot- 
ing, "  Sundries  "  total  should  then  agree  with  total  of  "Amounts  Payable  " 
column. 

Paying  and  Posting 

As  the  Vouchers  are  paid  the  number  of  the  check  drawn  in  payment 
is  entered  on  the  upper  right-hand  corner  of  the  voucher. 


112       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

If  discount  is  deducted  the  memo,  of  discount  is  then  made  on  the 
face  of  voucher  that  the  party,  to  whom  sent,  may  readily  understand  your 
figures;  the  charge  is  made  on  the  Cash  Book  to  "  Vouchers  Audited,"  and 
amount  of  voucher  is  put  in  "  Vouchers  Audited  "  column,  not  posted  to 
the  ledger  as  charged,  but  posted  in  one  total  at  end  of  month.      (  Fig.  33. ) 

Discounting 

If  a  voir  her  is  subject  to  discount,  charge  on  Cash  Book  in  "  Vouch- 
ers Audited  "  column,  the  full  amount  of  voucher,  in  "Amount  Paid  " 
column  the  actual  amount  paid,  or  the  face  of  the  check,  and  in  "  Dis- 
count "  column  the  discount  deducted. 

The  total  of  the  "Amount  Paid  "  column  together  with  the  total  of 
"  Discount  "  column  added,  will  equal  the  addition  of  the  other  columns 
on  the  credit  side  of  the  Cash  Book.     (Fig.  33,  page  127.) 

By  this  arrangement  of  the  Cash  Book,  one  posting  at  end  of  month 
answers  for  all  vouchers  paid,  and  is  a  great  saving  of  time  over  the  old 
way  of  posting  each  payment  as  entered. 

Marking  Voucher   Record   as  Vouchers  Are   Paid 

On  the  voucher  record  is  noted  in  "  Date  Paid  "  column,  the  day  on 
which  each  voucher  is  paid,  and  a  reference  to  this  column  shows  vouchers 
unpaid,  and  is  another  check  both  on  the  ledger  account  and  on  the  vouch- 
ers remaining  in  the  safe. 

No  Letter  Needed  to  go  with  Voucher 

By  using  vouchers,  letter  writing  when  paying  a  bill,  is  unnecessary, 
as  a  voucher  with  check  enclosed  is  sufficient. 

If  a  stamped  return  envelop'.'  i-  enclosed  with  the  check  and  voucher, 
a  prompt  return  of  voucher  duly  receipted  is  insured.     But,  many  houses 


VOUCHER  NO. 


St.  Louis  Material  and  Supply  Co. 

GENERAL   OFFICE   314    N     4tm   STREET 

St.  LOUIS.  MO 19 NO. 


Pay  to  the 

ORDER  OF_ 


.DOLLARS 


To  LIBERTY  BANK  OF  ST.  LOUIS,    ) 
4-14  ST.  LOUIS.  MO. 


T(.«sum« 


: 


ORGANIZING  SET  2  INTO  DEPARTMENTS  AS  SET  3      11. 


"date*              memorandum 

TOTAL 

DEDUCTION 

ri»E«OMT 

DISCOUNT 

"I«H   ITCMS 

TOTAL 

NET  AMT, 

THE  tNCOIKMCNT  D«  PATCC  CONETLTUTCC  A  WCCEIPT    IN    fULl  Of 
THE    ACCOUNT    AS   ABOVE    STATED     NO   OTHCN  RECEIPT  NECESE  A"' 

do  not  send  their  vouchers  out  for  fear 
of  losing  one  or  more  through  careless- 
ness of  payee  who  might  forget  to  sign 
and  return  them,  and  instead  use  the  fol- 
lowing plan:  (See  Figs.  30A  and  SOB.) 
In  addition  to  the  usual  serial  check 
number  —  the  cashier  notes  on  the  face  of 
the  check  in  ink  —  the  number  of  the 
voucher  which  the  check  pays  and  in  the 
printed  space  which  appears  on  the  reverse 
of  the  check,  notes  the  particulars,  and 
Fig.  30B  — Back  of  check.  simply  mails  the  check,  which  requires  no 

other  receipt,  because  the  endorsement  of  the  check  establishes  the  fact  of 

payment  of  that  voucher. 

Check  Number  on  Voucher  and  Voucher  Number  on  Check 

It  is  also  usual  to  note  on  the  entry  in  the  Cash  Book  when  paying 
a  voucher,  the  number  of  the  check  enclosed  and  on  the  check  the  voucher 
number.  From  many  years'  experience  the  convenience  in  tracing  up  a 
payment  is  most  satisfactory,  as  vouchers  show  check  number  used,  and  on 
check  the  number  of  voucher  which  it  pays. 

Sales  Book 

Department  Sales  Book 

The  Sales  Book  in  this  set  may  be  similar  to  the  one  used  by  Robert 
Bell  &  Co.  (Figs.  23,  page  91,  and  35,  page  128),  and  distribution  of 
department  goods  used  on  each  sale  made  on  a  separate  columnar  book, 
or,  if  preferred,  a  columnar  book  with  one  column  for  amount  of  bill  and 
one  column  each  for  the  respective  department  may  be  used  and  from 
the  carbon  or  office  copy,  the  distribution  made  (Fig.  36,  page  12S),  or 
in  each  column  of  the  proper  department  put  the  total  amount  of  goods 
of  that  department  used  on  each  sale  and  at  the  end  of  month  credit  the 
sales  of  the  respective  departments,  A,  B,  C,  and  D,  with  total  shown, 
which  when  added  should  agree  with  total  of  "Amounts  Sold  "  column. 

The  "  Total  Sold  "  has,  as  entered,  been  debited  or  charged  to  the 
customers'  accounts,  and  by  crediting  the  respective  departments'  Sales 
Account,  the  debits  are  equal  to  the  credits,  as  in  a  journal. 

Sales  of  Each  Clerk 
Should  it  be  desirable  to  know  the  amount  sold  by  each  clerk,  and  also 
the  amounts  sold  by  them  of  each  department,  the  columnar  book  is  used, 


114       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

giving  each  clerk  a  page,  hut  if  only  the  department.  Cash  Sales,  and  a 
check,  to  see  that  all  sales  are  to  be  accounted  for,  the  columnar  book  may 
be  used  as  (  Fig.  37,  page  129),  and  a  similar  page  for  charge  sales. 

The  sales  of  each  salesman  and  his  usual  sales  ticket  are  shown  that 
no  tickets  may  be  overlooked,  but  if  a  ticket  is  spoiled  from  any  cause,  that 
ticket  turned  in  and  so  noted.     (  Fig  37,  page  1  29.) 

Monthly  Record  of  Sales  by  Departments 

'Fhe  columnar  book  may  not  come  ruled,  just  as  it  appears  in  this 
illustration,  but  with  a  rule  and  red  ink,  .-mall  columnar  divisions  may 
be  made  and  thus  avoid  the  expense  of  a  book  made  to  order. 

At  the  end  of  the  month  the  monthly  totals  of  sales,  and  by  depart- 
ments, cash  as  well  as  charge  sales,  may  be  entered  on  a  page  of  the  book 
set  apart  and  headed  as  (Fig.  34,  page  129). 

The  total  columns  A,  B,  C,  and  D,  added,  should  equal  the  total  foot- 
ing of  Total  column,  which  is  also  the  sum  of  charge  and  cash  sale-. 

Unless  special  sale  tickets  are  used  for  each  department  the  salesman 
should  mark  or  letter  on  the  bill  of  such  goods,  when  making  out  his  ticket, 
or  put  the  department  mark  on  the  line  with  last  of  the  several  articles  of 
that  department. 

Distribution  of  sales  should  be  made  as  soon  as  convenient  and  may 
be  noted  in  pencil  on  one  corner  of  the  carbon  copy  of  each  hill,  as  it  may 
be,  and  later  entered  in  the  distribution  column. 

Using  Lull  in  Business  to  Advantage 

If  a  regular  cashier  handles  the  cash  sales  as  made,  he  could  in  pen- 
cil on  this  columnar  book,  distribute  the  sales  during  a  lull  in  the  work, 
and  by  using  this  time  judiciously,  find  at  the  end  of  the  day  all  sales  so 
distributed,  and  a  footing  of  these  departments  and  a  proof  of  the  total.-, 
by  comparing  with  the  total  cash  sales,  can  be  quickly  made. 

In  this  set  No.  3  of  department  books,  the  ruling  of  the  debit  or  left- 
hand  side  of  the  Cash  Book  may  be  similar  in  every  respect  to  that  of  the 
Cash  Book  used  by  Robert  Bell  &  Co.,  set  No.  2,  and  entries  similarly 
made,  but  in  this  set  (Fig.  33,  page  127)  the  credit  side  has  rulings  to 
record,  voucher  number,  vouchers  paid,  instead  of  Merchandise  and 
Expense,  but  other  column  similar  to  Cash  Book  of  set  No.  2.  (  Fig.  22, 
page  93.) 

Paying  and  Charging  Voucher 

When  a  voucher  is  paid,  the  charge  is  to  "  Vouchers  Audited,"  as  that 
account  assumed  payment  of  all  invoices  and  bills  to  be  paid,  as  soon  as 


ORGANIZING  SET  2  INTO  DEPARTMENTS  AS  SET  3      115 

these  bills  were  credited  on  the  voucher  record  in  the  column  "Amounts 
Payable,"  and  the  debits  to  the  several  accounts  for  which  they  were 
bought,  made  when  the  distribution  totals  are  debited  their  account  from 
the  voucher  record. 

Discount  or  Deduction  from  Voucher.     (Fig.  33,  page  127.) 

The  column  "  Vouchers  Audited  "  paid  must  contain  the  full  amount 
of  vouchers  as  recorded,  so  that  the  "Vouchers  Audited"  ledger  account  may 
be  balanced  and  any  deduction  after  the  voucher  is  made,  say  by  discount 
entered  in  discount  column.  But,  if  a  deduction  other  than  discount  to  be 
made,  is  later  discovered,  a  journal  entry  is  made,  either  debiting  the 
Vouchers  Audited  account  and  crediting  the  account  to  which  it  was  origin- 
ally charged,  and  so  noting  plainly  on  the  voucher  that  the  proper  amount 
only  be  later  paid;  or  if  the  amount  is  for  a  voucher  already  paid,  by  charg- 
ing the  amount  of  deduction  to  the  seller  through  the  journal,  requesting 
that  seller  to  remit  by  check,  or  if  not  so  done,  deduct  from  the  next  voucher 
due  that  house,  charging  the  full  amount  of  voucher  later  paid,  crediting 
the  house  on  debit  side  of  Cash  Book  for  amount  deducted  in  the  Sundries 
column,  and  in  the  Amount  Paid  column  on  credit  side  of  cash,  write  the 
amount  actually  paid.     (Fig.  33,  page  127.) 

Some  prefer  to  keep  a  memo,  of  any  such  deduction  until  an  invoice 
is  received  later,  make  the  deduction  from  the  face  of  that  invoice,  explain 
the  deduction  on  the  voucher,  and  enter  up  this  voucher  for  this  difference 
or  the  face  of  bill,  as  it  shows  after  the  deduction  is  made. 

Bills  Payable 

Bills  payable  are  not  usually  included  in  the  vouchers,  but  paid 
separately,  the  note  being  the  voucher  and  charged  in  "  Sundries  "  column; 
though,  if  preferred,  a  voucher  may  be  made,  describing  the  note  and  taken 
with  check  to  bank,  when  it  is  to  be  paid  and  listed  and  treated  as  the 
other  vouchers. 

Canceled  Notes  Preserved 

As  all  canceled  notes  kept  in  the  safe  can  be  easily  produced,  and  as 
some  banks  may  object  to  signing  such  a  voucher,  the  Bills  Payable  are 
sometimes  treated  as  shown  in  the  Cash  Book.     (Fig.  33,  page  127.) 

At  the  end  of  the  month  the  Cash  Book  is  ruled  as  shown,  the  totals 
posted,  balance  brought  down,  and  the  Cash  Book  ready  for  the  next 
month's  entries. 


CHAPTER   XIV 

Both  Sets  Have  Same  Customers — Set  3 

AS  the  transactions  shown  in  both  sets  of  books,  Xo.  2  and  3,  are 
of  like  amounts,  with  the  same  persons,  the  same  customers' 
ledger  account  (Fig.  26A  and  26B,  pages  96  and  97)  are  used 
bor  both  sets,  and  only  the  general  accounts  show  any  difference  in  treat- 
ment. 

In  this  set  the  Voucher  System  plays  an  important  part. 

Instead  of  Crediting  the  Creditors  on  the  Journal  the  accounts  pay- 
able are  written  upon  the  vouchers  and  so  recorded  and  the  debt  due  a 
seller  or  creditor  is  transferred  to  Vouchers  Audited  and  so  remains  until 
paid.  When  paid  Vouchers  Audited  account  is  charged  or  debited  that 
payment.  The  same  customers  as  in  Set  2  owe  the  same  bills,  though  in 
Set  3  the  sales  are  departmentized. 

Instead  of  preparing  new  names,  new  transactions  and  dates,  the 
previous  ones  are  used  that  the  comparison  between  the  two  may  more  fully 
be  accentuated  and  the  transition  so  clear  that  any  merchant  may  be  able 
to  change  at  any  time  from  general  to  department  books  when  proper 
inventory  is  taken. 

When  possible  a  business  should  be  departmentized.  The  time  and 
extra  work  is  a  small  price  to  pay  for  the  satisfaction  in  being  able  to  see, 
like  the  Texas  Solon,  "  Where  you  are  at,"  and  which  is  the  useless  depart- 
ment, or,  better  still,  start  the  investigation  which  may  disclose  why  the 
department  is  not  making  money. 

An  intelligent  man  wants  the  truth  and  some  men  will  insist  on 
knowing  all  they  can  about  their  business  and  whether  they  are  big  enough 
for  the  job  they  fill. 

We  start  with  Trial  Balance  Xov.  30th  (Fig.  32A  )  arranged  by 
departments.     (See  page  125.) 

In  this  set  of  Bell  &  Davis  it  may  be  as  well  to  use  the  old  style  diary 
day-book  as  in  the  set  Robert  Bell  &  Co.,  and  note  the  difference  as  we 
proceed.  On  the  extreme  right  are  the  pages  of  Cash  Book,  Journal,  Sales 
Book  or  Ledger  of  the  entry. 

(Figs.  32  to  50,  pages  125  to  145,  referred  to  on  page  125  follow 
the  diary,  Figs.  31 A  to  31H,  pages  117  to  124.) 

116 


BOTH  SETS  HAVE  SAME  CUSTOMERS  —  SET  3       117 


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Fig.   31A  — Diary   of  Robert   Bell,   Third   Set 


IIS       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 


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I  .       Diarv  o(    R     erl    Bi   I     I  ..mi    >l    —  Continued. 


BOTH  SETS  HAVE  SAME   CUSTOMERS  —  SET  3        119 


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Fig.   31C  — Diary   of   Robert    Bell,   Third    Set  —  Continued. 


120       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 


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Fig.   .ilD-  Diarv  of   Robert    Bell,  Third   Set— Continued. 


BOTH  SETS  HAVE  SAME  CUSTOMERS  —  SET  3       121 


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Fig.   31E  — Diary  of  Robert   Bell.   Third    Set —  Continued. 


L22       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 


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Fig    31F        Diary  of  Robert  Bell,  Third  Set  — Continued. 


BOTH  SETS  HAVE  SAME  CUSTOMERS  —  SET  3       123 


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Fig.   31G  —  Diary   of   Robert  Bell,   Third   Set  —  Continue! 


124       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 


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Fig.  31H  — Diary  of  Robert  Bell,  Third  Set  —  Continued. 


The  diary  is  placed  just  before  the  books  in  which  the  transactions 
mentioned  are  entered  because  it  was  considered  easier  to  follow  the  entries. 

Explanation  is  made  of  Voucher  System,  department  segregation,  etc. 
Elsewhere  should  any  entry  need  fuller  explanation  the  index  at  back  of 
the  volume  gives  page  and  illustration.  The  Ledger  accounts  show  the 
balances  at  beginning  of  year  and  the  dates  upon  which  we  start  the  entries 
of  this  Set.  » 

The  expenses  might  have  been  more  minutely  segregated  into  a  num- 
ber of  divisions,  but  the  simple  segregation  is  more  easily  grasped  and 
should  when  understood  have  served  the  purpose  of  familiarizing  the 
reader  with  the  reasons  to  such  an  extent  that  the  principles  may  easily  be 
applied  in  actual  business  to  attain  any  degree  of  segregation  desired. 

As  you  are  aware,  we  separated  the  stock  of  merchandise  by  taking 
inventory  at  first  of  year  into  its  proper  classes  so  that  what  was  Stock,  or 
Merchandise,  is  now  Stock  A,  B,  C  and  I).  An  examination  of  the  ledger 
accounts  of  these  (  Fig.  41  A,  page  132  )  will  not. only  show  the  inventory 


BOTH  SETS  HAVE  SAME  CUSTOMERS  —  SET  3       125 


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Fig.  32A  —  Trial  Balance,  Set  3. 

to  start  the  year,  but,  for  convenience,  the  total  of  the  several  classes  of 
goods  bought  up  to  Nov.  30th  (Fig.  32A),  and  then  Fig.  38B,  page  131) 
for  December. 

The  amounts  shown  above  are  the  totals  of  inventory  Jan.  1st  together 
with  the  purchases  since,  making  the  balances  on  Nov.  30th  which  appear 
here. 

Expenses,  Sales,  etc.,  have  been  similarly  treated. 

As  a  means  of  more  clearly  considering  the  change,  compare  these 
balances  with  those  corresponding  in  Set  2  (Fig.  19,  p.  29),  and  pursue 
the  same  course  with  the  ledger  accounts  so  affected. 


126       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 


302 


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Fig.  32B    -  Set  3. 

The  debit  side  of  Cash  Book,  Set  3,  is  similar  to  that  of  Set  2 
(Fig.  21,  page  92).  The  receipts  of  cash  from  customers  is  not  affected 
by  the  departmentization  and  the  Cash  Sales  which  include  goods  from 
each  department  are  here  entered  without  distinction,  later  segregated  as 
shown  (Fig.  37,  page  129)  and  after  segregating  charged  sales  (Fig.  36, 
page  128),  and  transferred  to  their  several  departments  by  Journal  Entry 
(Fig.  34,  page  129.) 


BOTH  SETS  HAVE  SAME  CUSTOMERS  —  SET  3       127 


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The  credit  side  of  Cash  Book  — Set  3,  is  radically  different  in  arrangement  from  that 
of  Set  2  —  (Fig.  22,  page  93).  In  Set  3  merchandise  bought  is  entered  on  vouchers  and  segre- 
gated at  time  oft  Voucher  Record.  Expense  and  Sundries  are  also  treated  in  same  manner,  so 
that  instead  of  'being  posted  to  the  respective  accounts  from  the  Journal,  they  are  posted  in 
the  totals  from  the  Voucher  Record. 

In  the  column  "Vouchers  Audited."  above,  are  charged  all  vouchers  as  paid  and  only 
posted  to  the  ledger  in  one  total,  $2,738.56,  at  end  of  the  month. 

The  sundries  column  is  used  for  such  payments  as  are  not  paid  by  voucher,  though 
some  bookkeepers  make  a  voucher  for  every  disbursement.  The  procedure  is  optional  and 
carried  out  according  to  the  views  of  the  user. 


128       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 


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mi  page  .'"  of  Ledger  and  must  be  separated   into  Departments  later. 


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Fig.  36  —  Sales  by  Department 

It  may  lie  more  convenient  to  use  a  Sales  Book  ruled  as  Fir.  35,  later  segregate  the 
department  goods,  and  use  the  figures  in  transferring  from  General  Sales  account  to 
Departments  as  per  Fig.  34. 

If,  however,  it  is  preferred,  Fig.  36  may  be  used,  entering  tbe  amount  of  each  sale  in 
the  first  column  that  no  delay  need  occur  in  posting  to  customers'  debit  and  later  segregate 
and  credit  sales  by  Department  from  the  department  column.  This,  of  course,  is  done  if 
it  meets  the  views  of  each  manager.  When  the  principles  of  segregation  are  understood 
the  practice  admits  of  many  variable  and  time-saving  arrangements. 


BOTH  SETS  HAVE  SAME  CUSTOMERS  —  SET  3       129 


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Fig.  34  —  Journal  —  Set  3 


130       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 


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The  above  ruling,  or  such  as  may  suit,  need  not  be  confined  to  a  folio 
page  (two  pages  facing),  but  may  extend  over  four  or  more  pages,  by  the 
arrangement  usually  described  as  "  The  Short  Eeaf  Book."  If  four  pages 
are  considered  necessary,  two  wide  and  two  narrow  pages,  about  three 
inches  of  every  second  sheet  is  trimmed  off,  the  left  hand  margin  is  used. 
The  columns,  date  of  voucher,  voucher  number,  favor  of,  followed  by 
description  and  amount,  on  the  first  short  page,  on  which  may  be  ruled 
also  space  for  Sundries;  on  next  page  wages  A,  B,  C  and  D,  and  on  the 
fourth  or  wide  page  the  other  columns  as  needed. 


BOTH  SETS  HAVE  SAME  CUSTOMERS  —  SET  3       131 


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A  voucher  may  be  entered  and  the  distribution  of  that  voucher  may 
be  made  across  any  one  or  more  of  the  pages,  upon  the  same  continuous 
line,  just  as  if  it  were  one  wide  sheet. 

The  ruling  may  be  arranged  to  suit  the  details  of  the  business. 

The  totals  of  the  columns  are  all  carried  to  the  "  Sundries  "  Column 
at  end  of  month  and  when  "Sundries"  Column  is  then  footed  and  that 
total  should  agree  with  Account  Payable  Column. 

The  regular  accounts  are  posted  by  monthly  totals.  The  Sundries 
or  occasional  accounts  each  posted  promptly  after  entering. 


132       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 


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134       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 


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BOTH  SETS  HAVE  SAME  CUSTOMERS  —  SET  3       135 


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CHAPTER    XV 

Closing  Books  for  the  Month 

SALES  BOOK  footed  in  ink  and  total  posted  to  credit  of 
General  Sales  in  ledger.     (Figs.  35  and  41B,  pages 
128  and  133) S2.226.10 

( lash  Book  —  "  Cash  sales  "  posted  to  credit  of  General  Sale-. 

(Figs.  32  and  41B,  pages  93  and  133) 1,187.90 

"         "         "  Interest  Paid,"  total  posted  to  debit  of  interest 

account.     (  Figs.  32-41B,  pages  93  and  133)  .75 

"         "         "  Vouchers    Aud.,"    total    posted    to    debit    of 
Vouchers  Aud.     (Figs.  33-41A,  pages  127 

and   132) 2,738.56 

"         "         "  Discount    Rec'd,"    total    posted    to    "  Credit 

Disct."    (Figs.  33-41B,  pages  127  and  133)  36.60 

Cash  Received,  total  $3,573.00,  less  $817.60, 
balance  to  debit  "  Cash  Acct."      (Figs.  32- 

41A,  pages  126  and  132) 2,755.40 

"         "         Cash  paid  out,  total  posted  to  credit   "Cash." 

(Figs.  33-41A,  pages  127  and  132) 2,851.96 

"         "         Carried  cash,  "  Bal.  on  hand,"  forward  to  Jan. 

1.     (Fig.  32,  page  126) 721 .04 

Balanced     cash,     counting 

contents  of  drawer $20.00 

Balance  in  bank 701 .04 

$721.04 

Compared  Vouchers  unpaid  per  Voucher  Record  (Fig.  28, 
page   130)    with  balance  ledger  ace,   "Vouchers  Aud." 

(Fig.  41A,  page  132) 241.45 

and  found  as  yet  unpaid  — 

Voucher  22,  favor  Edgar  Dry  Goods  Co.  .  .   $173.32 
Voucher  23,  favor  Ely  Shoe  Co 67  .  93 

$241.45 

Closed  "General,  Rent,  Light  and  Heat,"  $103.20,  into  De- 
partments (Journal  Fig.  34,  page  129)  in  ratio  agreed  at 
beginning  of  year, 

136 


CLOSING  BOOKS  FOR  THE  MONTH  137 

A     1/2  of  balance,  $103.20 $51 .60 

B     1/8  of  balance,  $103.20   12.90 

C     S/32  of  balance,  $103.20 16.13 

D     7/32  of  balance,  $103.20 22.57 

103.20 


Closed  General  Expense  into  Departments  General  Expense. 
(Fig.  34,  page  129.) 

A     1/2  of  balance,  $101.30 $50.65 

B     1/8  of  balance,  $101.30 12.66 

C     5/32  of  balance,  $101.30 15.82 

D     7/32  of  balance,  $101.30 22.17 


Sales  for  month, 

Charge  sales.   (Fig.  35,  page  128) $2,226.10 

Cash  sales.     (Fig.  32,  page  126) 1,187.90 


distributed  on  segregation  sheets.     (Figs,  36, 
37,  pages  128  and  129.) 
Crediting  results  to 

"Sales     Dept.     A" $1,784.74 

B" 451.68 

C" 462.25 

D" 715.33 


$101.30 


3,414.00 


■      3,414.00 

by  Journal  Entry  (Fig.  34,  page  129) 

and  will  take  off  "  Before  Closing  Trial  Balance,"  or  trial  balance  after 
all  month's  work  is  in,  to  prove  the  books  —  before  closing  entries  are 
made. 

The  reason  we  take  off  the  Before  Closing  Trial  Balance  at  end 
of  the  fiscal  year  is  not  only  to  prove  by  balancing  that  the  accounts  have 
all  been  properly  entered,  but  also  to  facilitate  transferring  of  the  correct 
balances,  which  would  prove  a  tiresome  and  difficult  task  to  do  otherwise, 
and  tax  the  ability  and  patience  of  any  one  who  attempted  it. 


CHAPTER    XVI 

Closing  for  the  Year 

WE  debit  Genera]  Expense  (see  Journal  Entry,  Journal  p.  171. 
Fig.  43,  page  140),  $238.10. 
To  Dray  Stock  depreciation,  20%. 
To  Furniture  and  Fixtures  depreciation,  109 

Taxes  balance  used  up. 
Insurance  used  up. 
Balance  of  interest  paid  for  year. 
Reserve  for  bad  debts  Z7>  on  outstandings 
and  then, 
Close  General   Expense  in  proportion  outlined   (Journal    171,   Fig.   43, 
page  140),  $238.10,  into  General  Expense,  A,  B,  C  and  D. 

Bell  is  credited  interest  on  his  capital,  $5,000.00 $300.00 

Davis  is  credited  interest  on  his  capital,  81,000.00 60.00 

and  Profit  and  Loss  debited $360.00 

Trading  Account.       (See  Fig.  46,  page  144.) 

To  have  a  clear-cut  statement  of  results  in  trading,  or  buying  and 
selling  goods,  we  open  a  Trading  Account,  and,  as  the  inventory  is  now  all 
figured,  we  can  do  so. 

"  Trading  Account  "  is  only  a  convenient  account,  used  once  a  year, 
or  when  we  close  the  books,  though  some  bookkeepers  use  it  frequently. 
We  close  Dept.  Sales  A,  B,  C  and  D,  by  crediting  these 

to  Trading  Account.     (Fig.  43,  page  140.) 
We  close  Dept.  Stocks  A,  B,  C  and  I)  by  charging  these 

to  Trading  Account.     (Fig.  43,  page  140.) 
We  close  Dept.  Wages  A,  B,  C  and  D  by  charging 

these  to  Trading  Account.  (Fig.  43,  page  140.) 
We  close  Dept.  Rent,  Light  and  Meat  A,  B,  C  and  D 
by  charging  these  to  Trading  Account.  (Fig.  \3, 
page  140.) 
We  close  Dept.  General  Expense  A,  B,  C  and  D  by 
charging  these  to  Trading  Account.  (Fig.  43. 
page  140.) 

138 


CLOSING  FOR  THE  YEAR  139 

Then,  taking  the  figures  of  the  inventory  of  goods  on  hand  of  each 
department,  charge  these,  Stock  A,  B,  C  and  D,  the  respective  amount 
(Fig.  43,  Journal)  and  credit  Trading  Account  (Fig.  46,  page  144) 
because  Trading  Account  gives  back  the  stocks  to  those  departments  with 
which  they  can  commence  the  year,  to  use  for  sales. 

We  now  take  from  Trading  Account  the  profit  on  each  department 
(Fig.  43,  Journal),  by  debiting  Trading  Account  and  crediting  profit  on 
these  departments  to  Profit  and  Loss. 

(See  Trading  Account,  Ledger,  Fol.  19,  Fig.  46,  page  144.) 

And,  as  the  profit  shows  a  credit  from  Sundry  sources  of  a  total  net 
profit,  $2,796.25,  we  apportion  five-sixths  to  Bell  and  one-sixth  to  Davis 
(Journal,  Fig.  43),  debiting  and  thereby  closing  Profit  and  Loss  Account. 

The  Ledger  Account  of  Trading  Account  may  be  arranged  by  taking 
a  full  folio  or  double  page  of  the  ledger  and  ruling  addiitional  red  lines 
to  accommodate  the  different  departments. 

After  these  entries  have  been  made,  we  take  off  a  balance  sheet  (Fig. 
50,  page  145)  which  shows  the  condition  of  each  account  on  our  ledger 
and  with  these  balances  we  start  the  new  year's  business. 

On  pages  89  to  102,  the  entries  are  shown  for  set  2,  and  except  that 
this  No.  3  set  is  departmentized  and  set  2  is  not;  the  totals  are  the  same. 


140       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 


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Fig.  48 — -General  Ledger  Accounts  After  Closing  —  Continued  —  Set  3 


144       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 


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Trading  account  when  made  to  show  department  results  may  lie 
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The  rulings  show  each  department  distinguished  from  the  other  and 
yet  all  in  the  same  group. 

[f  preferred  Trading  Account  may  -how  greater  detail  —  say  Invoice 
Is,  freight,  greater  classification  of  expenses,  Insurance,  Dis- 
count, etc. 

Spe<  ial  Trading  Accounts  may  be  prepared  for  certain  ventures  and 
used  for  a  variety  of  purposes. 


CLOSING  FOR  THE  YEAR 


145 


A  knowledge  of  the  principles  involved  will  enable  a  bookkeeper  to 
prepare  a  complete  statement  showing  the  different  factors  or  elements 
of  the  transaction. 


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Fig.  SO  —  Balance  Sheet  —  Set  3 


CHAPTER  XVII 

Bank  Account 

THE  usual  check  book  has  checks  and  stubs,  on  which  sometimes 
many  unnecessary  memoranda  and  figures  are  made. 
Some  enter  the  deposits  on  the  face  of  the  stub  and  deduct 
the  check,  bringing  down  the  balance  just  below  and  over  the  next  check, 
but  the  most  satisfactory  method  seems  as  follows:  on  the  reverse  or 
back  of  stub  and  opposite  the  unused  check  is  placed  the  balance  in  bank 
at  the  beginning  of  the  month,  as  shown  by  your  check  book. 

Take  this  as  a  starting  point  and  under  it  write  the  date  and  amount 
of  the  next  deposit  (B),  add  in  pencil  and  continue  adding  the  deposits, 
making  pencil  footings,  carrying  forward  on  the  same  relative  side  of  the 
stub  (A).  The  penciled  footings  should  at  all  times  agree  with  the  debit 
penciled  footings  of  Amount  Received  column  of  the  Cash  Book,  since 
we  assume  that  you  deposit  every  cent  received. 

The  checks  should  all  be  numbered,  as  well  as  the  stub.  When  a 
check  is  to  be  drawn,  first  write  the  date,  to  whose  order,  for  what  drawn 
and  the  amount.  At  the  close  of  the  day  before  you  can  balance  cash, 
pencil  footings  of  checks,  drawn  since  the  first  of  the  month,  are  made  on 
the  stub.  (Fig.  52F,  page  147.)  Totals  at  the  bottom  of  the  page  or  stub 
(D)  are  carried  forward  to  the  top  of  the  stub  on  the  next  page. 

As  you  are  supposed  to  pay  all  bills  by  check,  these  penciled  figures 
of  checks  drawn  should  agree  with  the  penciled  totals  in  the  Cash  Book 
column,  "Amount  Paid,"  to  that  date.  (See  Figs.  22-.vS,  page-  93  and 
127.) 

Continue  adding  totals  of  deposits  on  back  of  stub  ((').  and  checks 
on  the  face  of  the  stub  until  the  end  of  the  month,  then  carry  the  total  of 
the  checks  issued  (D)  over  to  and  under  the  total  deposits  I  C  I  and  bring 
down  the  balance  in  ink  (  F ).  which  is  the  amount  you  would  have  in  bank, 
if  all  checks  have  been  paid.  If  the  balance  as  shown  on  the  books  of  the 
bank  does  not  agree  with  your  balance,  the  difference  is  the  checks  as  yet 
unpaid.  Your  pass  book  should  be  turned  into  the  bank  on  the  last  day 
of  the  month  to  be  balanced.  When  your  book  is  returned  you  may  find 
that  the  balance  as  shown  by  the  books  of  the  bank  (  K  )  doe-  not  agree  with 
the  balance  shown  by  your  check  book  I  F  I,  which,  as  explained  above, 

146 


BANK  ACCOUNT 


147 


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Fig.  52 


Face  of  Stub 


is  the  amount  of  checks  that  had  not  then  been  presented  to  the  bank  for 
payment. 

To  check  up  or  reconcile  your  check  book  with  bank,  arrange  your 
canceled  checks  by  number,  compare  with  the  stubs,  and  with  a  blue  or  red 
pencil  mark  with  a  check  (V)  those  paid. 

After  checking  them  all  off,  turn  to  the  stubs,  and,  commencing 
with  the  lowest  number  of  those  unchecked,  list  those  unpaid  by  number 
and  amount  on  the  back  of  the  stub  below  the  last  balance  (J),  total  the 
checks  unpaid  and  add  to  the  balance  as  shown  by  your  check  book.  This 
last  total  then  should  agree  with  the  balance  as  shown  by  the  bank,  if  no 
error  has  been  made. 

Now  draw  two  heavy  lines  on  the  stub  under  the  last  check  drawn, 
to  separate  those  of  last  month  from  the  present  month.  The  checks 
drawn  for  the  next  month  are  footed  in  pencil  as  drawn,  starting  with 
your  first  checks  of  current  month.  The  checks  of  previous  month  are 
not  included,  because  each  month  must  be  kept  separate.  The  balance 
as  shown  by  your  books  (E)  is  carried  forward  to  back  of  next  new  stub 


148       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

and  under  it  are  listed  the  daily  deposits  as  made  and  the  same  procedure 
as  before.  Of  course,  any  collection  made  for  you  or  the  proceeds  of  a 
discount  or  loan  to  you  by  the  bank  must  be  entered  on  the  stub  with 
the  deposits,  just  as  if  you  had  made  a  deposit  of  that  amount.  The 
checks  noted  as  not  paid  (J)  will  be  paid  by  the  bank  during  the  month 
and  appear  among  the  checks  at  the  next  balancing  by  the  bank. 

In  many  large  houses  the  checks  are  simply  in  pads  of  50,  all  prop- 
erly numbered  and  except  the  pad  in  use,  are  kept  safely  locked  up.  There 
are  no  stubs  to  the  checks,  but  the  particulars  which  are  usually  noted  on 
the  stubs  are  written  on  the  Check  Record,  which  is  usually  a  loose  leaf 
book,  of  52  lines  to  a  page  and  each  line  numbered.  The  left-hand  page 
lines  are  numbered  00  to  49,  the  right-hand  page  50  to  99,  and  by  pre- 
fixing the  hundred  to  the  figures  on  the  first  lines  would  indicate  the  num- 
ber of  the  check.  Thus,  1  before  00  is  100,  and  before  50  is  150,  and 
no  further  numbering  of  that  page  is  needed.  The  succeeding  pages  have 
each  its  respective  prefix. 

The  pages  are  usually  ruled  in  columns  to  show  date  of  check,  No. 
of  check,  favor  of,  for  what  drawn,  amount  of  check,  Voucher  No., 
amount  of  deduction,  Date  of  Deposit,  amount  and  balance. 

Thus  you  have  stubs  of  50  checks  on  each  page  or  100  stub-  on  a 
folio  page.  If  the  business  warrants  it  and  it  is  once  tried  no  return  will 
be  made  to  the  old-fashioned  check  book. 


CHAPTER   XVIII 

Corporations 

AS  many  of  the  smaller  concerns  have  become  incorporated  com- 
panies it  ma}-  be  well  to  touch  on  the  subject. 
Thirty  years  ago  there  were  comparatively  few  small  cor- 
porations. Those  then  in  operation  were  usually  banks,  railroads  and 
large  manufacturers.  As  the  advantages  became  more  generally  known, 
such  as  limited  liability,  a  continued  business  which  does  not  terminate 
with  the  death  of  an  officer  or  stockholder,  many  hundreds  of  small  con- 
cerns changed  from  firms  to  corporations. 

Death  Terminates  Partnership 

In  the  case  of  a  firm  the  death  of  one  partner  terminates  the  business 
unless  otherwise  specially  agreed  upon  in  writing. 

A  general  partner  in  a  firm  would  alone  be  liable  for  all  the  debts 
of  the  business,  but  a  stockholder  in  all  but  a  few  of  the  States  is  not 
liable  for  the  debts  of  the  corporation  beyond  the  amount  of  the  stock  he 
owns;  he  may  lose  what  he  has  invested  but  no  more,  except  in  National 
Banks  and  certain  other  special  corporations. 

The  amount  of  capital  contributed  to  carry  on  the  business  is  known 
as  Capital  Stock,  divided  into  shares  of  the  amount  agreed  on  when  the 
articles  of  association  are  drawn  up,  say  $1.00,  $5.00,  $50.00,  or  as  is 
usually  the  case,  $100.00  each. 

Each  stockholder  is  given  a  certificate  showing  how  many  of  these 
shares  he  has  subscribed  or  paid  for  or  the  proportionate  interest  he  owns 
in  the  corporation.  According  to  the  State  laws  there  must  be  at  least 
three  stockholders  to  organize  a  corporation. 

Let  us  suppose  that  Bell  &  Davis  have  concluded  to  change  their  busi- 
ness on  January  1,  1917,  to  a  corporation,  to  be  styled  the  Bell  &  Davis 
Mercantile  Company,  with  a  capital  stock  of  $6,100.00,  divided  into  61 
shares  of  $100.00  each,  of  which 

Bell  contributes    $5,000.00 

Davis  contributes   1,000.00 

Decker  contributes   100 .  00 

for  which  shares  are  to  be  issued, 

149 


150       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

To  Bell,  50  -hare.-,  J100.00  each S5.000.00 

To  Davis,  10  shares,  $100.00  each 1,000.00 

To  Decker,  1  share,  $100.00  each 100.00 

These  certificates  of  stock  may  be  issued  for  any  amount  from  one  up 
to  the  amount  owned.  Hell  may  have  certifii  ates  of  1  share,  2  shares, 
20  share-  and  27  shares  i  equals  50  I,  or  any  other  quantities,  provided  the 
total  is  for  the  actual  amount  due  him  and  no  more. 


Shares  Are  Personal   Property 

Thesi  shares  may  be  disposed  of  by  gift  or  sale  like  any  other 
sonal  property  —  such  as  a  bond  or  a  horse,  the  only  requirement  being  to 
sign  the  printed  transfer  on  the  back  of  the  certificate  before  parting  with 
it.  Title  to  the  horse  passes  by  delivery,  title  to  real  estate  by  decA,  and 
in  either  case  only  the  title  really  owned  can  be  given.  In  the  case  of  the 
horse  as  well  as  the  real  estate,  the  seller  must  satisfy  the  buyer  as  to  his 
title.  The  title  to  a  certificate  can  be  quickly  and  easily  verified  by  con- 
sulting the  office  of  the  corporation  where  a  record  is  kept  of  the  name, 
address,  number  of  the  certificate  and  number  of  -hare-  owned  1>\ 
stockholder. 

This  certificate  is  for  a  certain  number  of  -hare-  of  equal  parts  of  the 
capital  stock  and  is  simply  the  evidence  of  the  stockholder's  interest  in  the 
company. 

The  amount  of  that  certificate  in  dollar-  and  cents  cannot  be  with- 
drawn at  will  from  the  capital  of  the  corporation,  as  could  any  part  of  the 
capital  of  a  partner  in  a  firm  and  can  only  be  realized  upon,  by  sale  to 
some  one  else,  or  the  dissolution  of  the  company  and  a  division  of  the 
assets,  should  any  remain. 

The  capital  stock  account  is  one  account  on  the  ledger  usually  car- 
ried in  one  total,  but  the  -lock  certificate  book  show-  every  -hare  issued,  the 
date,  to  whom,  the  number  of  the  certificate  and  the  number  of  shares  of 
each  cerificate. 

For  Example 

Three  men  may  wish  to  buy  a  horse  valued  at  $200.00,  and  none  of 
them  has  sufficient  money  alone  to  buy  on  his  own  account,  yet  agree  to 
make  the  purchase  jointly,  the  revenue  from  the  use  of  the  horse  for  a  term 
of  years  to  be  divided  according  to  the  investment  of  each.  Papers  are 
drawn  up  stating  the  facts  and  each  receives  his  document  showing  his 
particular  interest  and  conditions  agreed  upon. 


CORPORATIONS 


151 


In  the  meantime,  one  of  the  three,  who  had  invested  $50.00  in  the 
purchase,  becomes  dissatisfied  at  the  revenue  returns  and  prefers  the  cash 
he  had  invested,  but  finds  that  he  can  only  secure  the  cash  by  sale  of  his 
interest,  as  evidenced  by  his  paper  or  certificate,  to  some  one  else. 

When  he  is  able  to  sell,  the  purchaser  takes  the  paper  showing  that 
the  interest,  duly  assigned,  to  the  other  two  owners,  and  has  a  new  paper 
issued  showing  the  interest  he  now  has  in  the  horse  is  upon  same  terms  as 
that  of  the  man  from  whom  he  bought. 

Thus,  you  see  the  amount  of  money  invested  is  not  transferred  or 
given,  but  only  the  proportion  owned,  which  can  be  realized  in  no  other 
way  than  either  selling  the  interest  to  some  one  else  or  at  end  of  the  term 
sell  the  horse,  if  still  alive,  and  divide  the  proceeds  in  proportion. 

Let  us  see  what  entries  must  be  made  in  the  books  to  change  from  a 
firm  to  a  corporation. 

As  all  State  laws  demand  cash  or  its  equivalent,  we  prefer  to  use  the 
Cash  Book  for  the  entries  in  the  case.  No  new  books  are  necessary  for 
the  corporation,  as  those  which  have  heretofore  been  used  can  be  continued 
after  the  closing  entries  have  been  made,  just  as  entries  of  one  year  follow 
the  closing  of  those  of  the  one  passed. 

Of  course,  you  use  a  book  of  certificates  of  stock,  and  if  the  ledger 
account  of  capital  stock  is  not  sufficient  to  record  the  list,  a  special  stock 
certificate  register  is  used. 

First  a  bill  of  sale  is  made  by  Bell  &  Davis  to  Bell  &  Davis  Mer- 
cantile Company  of  all  property  and  accounts  as  shown  by  the  balance 
sheet  of  December  31st  and  in  that  bill  of  sale  a  proviso  that  the  corpora- 
tion as  successors  will  settle  all  debts  as  shown  by  the  last  balance  sheet. 
A  copy  of  the  bill  of  sale  is  made  in  the  journal  in  the  first  space  following 
the  previous  year's  closing. 

Bell  draws  a  draft  on  the  company  for  $5,000.00.  Davis  one  for 
$1,000.00,  and  hands  to  the  Treasurer  to  pay  for  the  stock  to  be  issued, 
for,  as  the  firm  owed  these  amounts  to  both  Bell  &  Davis,  the  new  company 
assuming  the  debts,  owes  them  now. 

These  drafts  are  entered  upon  the  credit  side  of  the  Cash  Book. 


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Fig.  58 


152       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

These  entries  as  posted  on  the  ledger  to  the  debit  of  Bell,  $5,000.00, 
of  Davis,  $1,000.00,  and  closes  the  capital  account  of  each. 

The  amounts  received  by  draft  and  currency  are  entered  on  the  debit 
side  of  cash. 


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Fie.  59 


These  entries  on  the  Cash  Book  are  payments  on  Capital  Stock. 
Capital  Stock  Account  is  then  opened  in  the  ledger  on  page  1 .  a-  there  is 
ample  space  under  the  now  closed  account  of  Robert  Bell  Capital  Account. 


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Fig.  60 


Ledger  page  showing  Robert  Bell  Capital  Account  closed  or 
ruled  up,  and  Capital  Stock  Account  opened  and  two  heavy  red  lines  ruled 
across  the  page.     X  — ■  -  X 

Capital  Stock  Account  rarely  changes  unless  there  is  an  increase  or 
decrease,  which  is  the  only  event. 

This  account  is  footed  for  present  in  pencil,  showing  a  total  to  the 
credit  of  Capital  Stock,  $6,100.00. 

These  two  sets  of  entries  complete  the  change  or  transaction  of  Bell 
&  Davis,  a  firm,  to  Bell  &  Davis  Mercantile  Company,  a  corporation. 

Unless  the  balance  sheet  is  very  long  it  is  advisable  to  let  it  be  copied 
on  the  journal  just  after  the  Bill  of  Sale,  being  the  amounts  transferred — the 
property  turned  over  and  the  debts  to  be  paid,  that  there  arise  no  disputes 
over  it  in  the  future. 


CORPORATIONS  153 

Pardon  personalities,  but  one  day  the  head  bookkeeper  of  a  firm  of 
$200,000  capital  called  at  my  office  and  said  the  firm  would  on  the  1st 
of  January  change  from  a  firm  to  a  corporation  and  that  he  had  bought 
new  ledgers,  cash  and  sales  books,  etc.,  in  anticipation,  and  had  been  study- 
ing the  easiest  way  to  rule  up  the  5,000  and  more  customers  and  the  other 
accounts,  before  transferring  or  opening  them  in  the  new  books,  but  the 
more  he  pondered  the  bigger  grew  the  job  and  now  wanted  to  know  if  I 
could  suggest  an  easier  way.  I  told  him  in  a  few  words  the  substance  of 
above  and  made  a  pro  forma  entry  in  pencil.  It  is  just  such  cases  that 
suggested  going  into  details  and  not  presuming  thorough  knowledge  in 
every  case. 

A  proposed  corporation  has  no  legal  existence  and  cannot  carry  on 
business  until  it  has  been  granted  a  charter  by  the  State. 

The  legal  requirements  are  that  three  or  more  persons  (stockholders) 
contributing  the  capital,  must  agree  on  the  kind  of  business  to  be  done 
and  at  what  place,  the  amount  of  capital  stock,  the  number  and  par  value 
of  the  shares,  etc.,  and  have  this  agreement,  called  the  Articles  of  Associ- 
ation, written  up  in  proper  form  and  duly  sworn  to. 

This  paper  must  be  recorded  at  the  County  Seat  and  sent  to  the  Secre- 
tary of  State  to  be  approved  by  him.  Upon  approval  he  issues  the  charter. 
Thus  you  see  the  State  creates  the  corporation  and  as  a  logical  deduction 
has  a  perfect  right  to  supervise  and  regulate  its  own  creature,  hence  the 
liability  to  the  State  for  any  unlawful  acts  of  the  corporation. 

As  each  State  has  its  own  corporation  laws  and  the  Federal  Govern- 
ment has  general  laws  applicable  to  interstate  business,  legal  advice  is 
necessary  on  many  questions  of  procedure. 


Dividends 

The  Capital  Stock  of  a  corporation  corresponds  to  the  Capital 
Accounts  of  the  members  of  a  firm,  but  the  division  of  profits  is  dif- 
ferent. 

The  annual  profits  of  a  firm  are  usually  divided  proportionally  among 
its  members,  but  the  whole,  or  part,  of  the  profits  of  a  corporation  is 
divided  among  its  stockholders  according  to  their  holdings,  in  the  shape  of 
dividends. 

Usually  a  part  of  the  profits  is  credited  to  "  Surplus  "  account,  to  be 
left,  for  the  time,  in  the  business,  and  the  balance  credited  to  Dividend 
Account,  for  distribution  among  the  stockholders,  in  which  case  the  pro- 
cedure is  as  follows: 

After  ascertaining  the  amount  of  net  profits,  the  Board  of  Directors 


154       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

meet  to  consider  its  disposition  and  may  decide  (as  would  be  done  if  Bell 
&  Davis  were  a  corporation )  that, 

As  the  net  profits  amount  to $2,796.25 

they  will  use  for  dividends 1,830.00 

and  place  to  the  credit  of  Surplus  Fund 

the  balance   966 .  25 

The  entry  in  this  case  would  be, 

Dec.  30     

Profit  and  Loss,  Dr $2,796 .  25 

To  dividend  No.  1,  equals  3095  dividend,  declared 

payable $1,830.00 

To  Surplus  Fund,  balance  of  profit,  1916,  trans- 
ferred         966.25 

$2,796.25 

As  the  dividends  arc  paid  they  are  charged  "  Dividend  Account"' 
Xo.  1,  which  account  will  show  no  balance  after  all  dividend  checks  have 
been  issued  to  the  stockholders,  as  dividend  checks  are  charged  this 
account. 

Xo  interest  on  the  capital  stock  other  than  dividend-,  is  paid  the 
stockholders,  as  in  the  case  of  a  firm,  in  which  each  member  is  first  credited 
with  interest  on  the  capital  he  contributed,  before  any  earnings  are 
distributed. 

In  a  corporation  the  dividends  are  not  only  expected  to  equal  a  rea- 
sonable interest  on  the  capital,  but  also  a  further  proportion  of  the  earn- 
ings, in  addition. 


CHAPTER    XIX 

Financial  Statements  for  Creditors 

HAVE  you  ever  been  requested  to  furnish  a  statement  of  your 
affairs? 
I  doubt  if  any  business  custom  ever  had  more  good  reasons 
to  justify  it  and  so  few  against  it  and  yet  none  is  more  generally  misunder- 
stood or  misconstrued  than  a  request  for  a  statement. 

Banks  Require  References  Before  Loaning 

If  you  happen  to  be  in  some  distant  city  and  in  need  of  funds,  with 
no  acquaintance  there,  and  should  apply  to  one  of  the  banks  for  a  loan, 
would  it  be  granted  at  once  without  question?  or  would  the  banker  ask 
for  reference;  how  you  expected  to  pay  it  and  what  is  your  condition? 

Would  you  not  cheerfully  explain,  not  only  your  financial  condition 
in  detail  as  fully  as  possible,  but  tell  him  with  whom  you  dealt  and  give 
such  other  references  and  be  satisfied  that  his  course  is  the  only  good  busi- 
ness procedure  under  the  circumstances? 

A  Sale  on  Time  is  a  Loan 

When  you  buy  from  a  house  with  which  you  had  no  previous  dealings, 
you  ask  for  a  loan  of  the  value  of  those  goods,  to  be  paid  at  some  future 
date  and  if  that  house  should  simply  do  as  the  banker  did,  is  it  not  acting 
on  proper  business  lines? 

Would  you  deliver  goods  on  the  order  of  some  stranger  unless  good 
reasons  had  first  been  given? 

In  either  case  the  buyer  or  borrower,  for  that  is  his  position,  should 
by  facts  and  satisfactory  references  show  that  he  is  worthy  of  the  credit 
asked  and  the  seller  on  his  part,  has  the  right  to  know  whether  he  is 
justified  in  parting  with  the  goods. 

No  honest  man  would  ask  the  loan,  for  that  is  what  it  really  is,  if  he 
doubted  his  ability  to  meet  it  when  due. 

If  a  merchant,  whose  account  with  some  house  may  be  out  of  propor- 
tion or  past  due,  be  asked  for  a  statement  and  promptly  complies,  he  may 

155 


156       BOOKKEEPING  AXD  BUSINESS  MANAGEMENT 

not  always  receive  immediate  and  large  advances,  but  the  house  in  ques- 
tion can  and  does  generally  suggest  some  remedy  or  reform  that  proves 
most  valuable  and  if  in  good  faith  complied  with,  extends  very  cordial  and 
valuable  assistance  which  bridges  the  chasm  and  leads  to  success. 

It  may  be  a  caution  against  continued  overbuying,  failure  to  collect 
up  closely  the  outstanding  accounts;  or  to  cut  out  certain  heavy  and 
unnecessary  expenses,  to  install  a  simple  and  satisfactory  system  of  book- 
keeping or  some  other  remedy  justified  by  the  conditions,  that  is  suggested. 

Be  frank  and  open  with  those  who  are,  in  fact,  first  your  friends  and 
next  your  bankers. 

True  confidence  makes  no  reservations. 

When  a  statement  of  your  affairs  is  requested  send  a  copy  of  the  last 
monthly  trial  balance  —  such  as  (Figs.  9,  page  45;  19,  page  89;  32A, 
page  125),  If  during  the  current  year,  together  with  the  last  annual  bal- 
ance sheet. 

If  requested  during  January  and  February  send  the  previous  D< 
ber  balance  sheet  (as  per  sample  Figs.  29D,  page  102,  and  50,  pa.ne  145.  i 

The  following,  from  a  leaflet  issued  by  the  National  Association  of 
Creditmen,  embraces  the  whole  subject  in  the  fewe>t  words  of  classical 
English,  and  should  sink  deep  in  the  mind  of  every  merchant. 

"  The  Reciprocal  Value  of  a  Signed  Statement " 

"  Good  credit  in  the  markets  of  the  world  enables  the  merchant  to  add 
to  his  ability  to  do  business.  It  gives  him  the  use  of  enlarged  capital,  thus 
enabling  him  to  carry  a  more  complete  stock,  increase  his  sales  and  mag- 
nify his  profits. 

Large  assets  are  not  always  necessary  to  the  creation  of  credit;  what 
is  most  desirable  is,  that  credit  be  in  relative  proportion  to  the  actual  assets, 
and  in  harmony  with  condition-  which  create  and  maintain  it.  .1  mer- 
chant's capital  is  the  sum  of  his  net  available  resources  plus  his  cred 
The  giver  of  credit  is  a  contributor  of  capital,  and  becomes,  in  a  certain 
sense,  a  partner  of  the  debtor,  and,  as  such,  has  a  perfect  right  to  complete 
information  of  the  debtor's  condition  at  all  times. 

Credit  is  given  a  merchant  because  of  the  confidence  reposed  in  him. 
Requesting  a  statement  when  credit  is  asked  is  not  a  retlection  on  one's 
character,  honesty,  or  business  ability,  but  is  done  to  secure  information 
to  enable  business  to  be  conducted  intelligently. 

When  a  statement  is  made  it  should  be  absolutely  correct.  To  make 
it  so  necessitate^  the  taking  of  at  least  an  annual  inventory  and  the  keep- 
ing of  an  accurate  set  of  books.  Statement  giving,  therefore,  will  tend  to 
make  a  debtor  a  better  buyer,  because  more  familiar  with  his  stock,  more 


FINANCIAL  STATEMENTS  FOR  CREDITORS  157 

careful  in  giving  credit,  more  conservative  in  incurring  debt,  and  will 
result  in  a  better  knowledge  of  his  business  generally. 

A  merchant  who  desires  to  serve  his  own  best  interests  should  recog- 
nize that  his  most  valuable  possession,  apart  from  his  actual  assets,  is  a 
sound,  substantial  and  unquestioned  reputation  as  a  credit  risk,  and  that, 
under  the  prevailing  conditions  and  demands  of  business,  the  most  effect- 
ive, and  eminently  the  best  way  to  prove  his  basis  for  credit  is  to  be  willing 
to  submit  a  statement  of  his  financial  condition." 

Guess-work  Statement 

Among  the  many  unnecessary  problems  which  daily  tax  the  gray  mat- 
ter of  the  credit  man,  none  is  so  perplexing  as  the  "  guess-work  statement  " 
received  from  some  customer  who  could  and  should  have  books,  to  show 
an  intelligent  statement  of  his  condition. 

A  Case  in  Point 

Instead  of  that  he  may  possibly  come  near  duplicating  the  case  of  a 
merchant  in  one  of  our  small  towns  whom  I  visited  in  the  matter  of  his 
past-due  account. 

When  asked:  How  much  do  you  owe  other  houses?  He  "guessed" 
about  $400,  but  upon  investigation  he  had  unpaid  invoices  of  $1,270.00. 

How  much  is  owing  you  by  your  customers?  He  "  thought  "  about 
$2,000,  and  our  search  disclosed  memos,  of  all  sizes  and  shapes  —  bills  of 
about  $1,000. 

How  much  stock  on  hand?  He  "  judged  "  it  would  amount  to  $3,000, 
but  as  it  was  all  in  sight  I  "  might  make  a  closer  estimate." 

When  was  last  inventory  taken?  None  since  he  started  three  years 
ago. 

We  found  on  one  hook-file  dunning  letters,  unpaid  invoices,  state- 
ments and  trade  market  circulars;  on  another  memos,  of  bills  sold  on 
time,  some  penciled  on  scraps  of  wrapping  paper,  some  on  bill  heads  and 
a  few  on  old  used  envelopes. 

The  paid  invoices  and  receipts  were  in  an  old  box  where  they  had 
been  tossed  as  through  with. 

This  was  the  worst  case  in  my  experience,  but  if  you  can  persuade  any 
old  credit  man  to  talk  he  may  recall  some  very  interesting,  and  as  we  say, 
"  raw  "  cases,  and  let  drop  his  opinion  of  how  dangerous  such  incompe- 
tent, shiftless  men  are  to  the  merchants  of  the  community. 

No  system  will  run  itself,  but  if  any  merchant  desires  advice  on  the 
subject  of  improving  his  present  methods  he  will  find  a  ready  response  by 
his  wholesale  friends  and  receive  most  valuable  suggestions. 


158       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 


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Fic.  53B 


CHAPTER    XX 

Mercantile  Agencies 

SOME  merchants  resent  any  request  from  a  Mercantile  Agency  for  a 
statement,  replying  that  the  houses  from  whom  they  now  buy,  know 
all  that  is  necessary  and  refuse  further  information,  simply  because 
they  have  not  looked  at  both  sides  of  the  question. 

No  Mercantile  Agency  may  expect  to  hold  its  patronage  unless  it  can 
promptly  furnish  its  subscribers  reliable  information  from  every  section. 

The  completeness  of  its  data  depends  upon  many  sources,  the  opinions  of 
neighbors,  the  county  records  where  deeds,  mortgages  and  agreements  are 
filed,  the  reputation  of  the  dealer  in  the  markets  where  he  buys,  and 
particularly  his  own  statements. 

These  reports  based  upon  such  information  as  may  be  secured,  impar- 
tially state  those  facts,  their  source  and  conclusion  arrived  at,  the  agency 
having  no  interest  to  do  otherwise,  as  its  very  reputation  rests  upon  fair  and 
true  reports. 

Should  a  request  for  a  statement  be  refused,  the  agency  has  no  other 
course  than  to  draw  its  own  conclusions  from  what  it  can  indirectly  learn, 
and,  as  a  consequence,  the  rating  then  assigned  is  in  nearly  all  cases  below 
what  it  otherwise  might  have  been  had  a  statement,  corroborated  by  facts, 
been  furnished. 

If  all  the  larger  concerns  cheerfully  comply,  why  should  you  not  help 
the  agency  to  put  your  case  as  it  should  be? 

It  rests  with  you,  hence  do  not  complain  if  your  rating  is  below  what 
you  had  expected. 

"  Your  credit  is  the  most  valuable  asset  you  can  have,  and  will  stand 
by  you  when  all  else  fails. 

"  Every  jobber  you  order  from  looks  at  an  agency  book  before  filling 
the  order. 

"  By  all  means  make  the  agencies  an  honest,  clean  statement  upon 
starting  in  business,  and  keep  it  up  each  year. 

"  No  business  is  ever  too  small  nor  grows  too  large  to  be  indifferent 
to  its  credit." 


15Q 


CHAPTER    XXI 

Insurance 

THE  following  from  a  leaflet  issued  by  the  Fire  Insurance  Com- 
mittee of  the  National  Association  of  Creditmen  is  so  clear  and 
convincing  that  anyone  who  reads  should  heed  it  without  a 
moment's  delay. 

"  To  you  as  a  fair-minded  business  man,  I  desire  to  put  two  simple 
questions  which  in  self-interest  you  cannot  put  off  answering: 

Is  your  property  so  insured  that  in  case  of  its  destruction  by  fire  you 
could  pay  dollar  for  dollar  to  your  creditor.-? 

Again,  in  case  of  fire  upon  your  premises  would  your  savings,  per- 
haps of  a  lifetime,  be  safeguarded  by  enough  and  sound  insurance  to  keep 
them  intact? 

If  you  cannot  give  me  an  emphatic  "  yes  "  as  your  answer,  then  you 
are  taking  longer  chances  than  anyone  has  a  right  to  take. 

It  may  be  that  you,  like  hundreds  of  other  business  men,  consider 
yourself  comparatively  free  from  danger  of  fire  loss,  because,  perchance, 
your  town  or  city  has  thus  far  escaped  a  scorching,  a  fact  that  is  more  likely 
due  to  good  fortune  than  to  any  inherent  advantages,  for  conditions  sim- 
ilar to  those  all  about  you  have  contributed  again  and  again  to  widespread 
and  disastrous  fires. 

You  owe  it  to  yourself,  your  family  and  your  creditors  to  surround 
your  business  with  safeguards  that  will  reduce  to  a  minimum  your  chances 
of  being  embarrased  by  a  fire  which  may  begin  in  your  premises,  or  per- 
haps in  the  premises  of  a  fellow  town-man  several  blocks  away.  77m 
means  not  only  insurance  but  adequate  insurance. 

In  most  lines,  stocks  are  larger  in  certain  periods  of  the  year  than 
others,  so  with  changes  in  the  value  of  your  stock,  do  not  overlook  changing 
the  amount  of  your  insurance. 

To  take  a  chance  with  your  insurance  is  not  business.  It  is  just  as 
important  to  charge  into  the  selling  price  of  your  goods  the  cost  of  insur- 
ance as  rent  or  interest  or  taxes. 

No  one  can  afford  to  sell  you  on  time  or  lend  you  money  if  you  are  not 
fully  insured,  for  your  ability  to  pay  when  the  debt  is  due  would  be 
destroyed  by  fire  and  your  creditors  in  that  case  would  find  that  they  had 

160 


INSURANCE  161 

been  your  insurers  without  the  compensation  which  a  prudent  insurance 
company  would  have  charged  for  the  service. 

Insure,  and  do  it  vow  —  otherwise  your  assets  to-day  may  be  cinders 
to-morrow." 

List  Policies  Carried 

Many  insurance  companies  furnish  a  register  in  which  the  policies 
are  listed,  giving  date  of  issue,  number,  company,  property  covered,  amount 
of  policy,  term  or  expiration,  rate  and  amount  of  premium,  etc.  If  only 
a  few  policies  are  carried,  the  description  space  in  the  insurance  ledger 
account  may  be  used  to  briefly  note  property  covered  such  as  stock, 
machinery,  buildings,  etc.,  and  the  date  of  expiration  on  the  line  of  the 
debit  when  premium  is  charged.  Of  course,  the  expiration  is  always 
noted  on  the  diary  among  the  matters  for  attention  that  day. 

The  following  article,  written  some  ten  years  ago  for  the  National 
Association  of  Credit  Men  by  my  very  good  friend,  Geo.  R.  Barclay,  states 
the  case  beyond  any  question  of  a  doubt. 

It  was  sound  when  written,  is  equally  sound  now  and  will  be  so  con- 
sidered, should  it  fall  into  the  hands  of  any  merchant,  long  after  both  he 
and  I  have  laid  aside  the  cares  of  this  busy  life. 

By  Geo.  R.  Barclay,  Simmons  Hardware  Company,  St.  Louis,  Mo. 

"No  one  doubts  the  truth  of  the  old  saying:  '  Self  preservation  is  the 
first  law  of  nature,'  and  I  think  it  follows  in  natural  sequence  that,  after 
self,  a  man's  worldly  goods  should  claim  his  best  efforts  for  their  protec- 
tion. There  are  not  many  merchants  who  are  so  fortunate  as  to  be  in  a 
position  to  assume  all  the  responsibilities  connected  with  their  business, 
neither  would  it  be  wise  for  them  to  do  so,  being  able. 

Every  man  owes  it  to  himself,  his  family  and  his  creditors  to  so  sur- 
round his  business  with  safeguards  as  will  reduce  to  a  minimum  his  chance 
of  being  embarrassed  —  possibly  hopelessly  so  —  by  reason  of  fire,  which 
may  have  had  its  origin  far  from  his  place  of  business  and  in  no  way 
chargeable  to  himself. 

The  item  of  fire  insurance  is  a  legitimate  item  of  expense  to  every 
well-organized  business,  and  my  experience  is  that  the  large  majority  of 
our  business  men  appreciate  the  fact.  While  I  am  free  to  admit  that  under 
some  conditions  the  rate  charged  by  insurance  companies  seems  high, 
there  are  good  reasons  for  this;  for  instance,  frame  structures  in  localities 
without  improved  fire  department  apparatus,  etc.  Where  the  risk  is  great- 
est the  people  who  take  the  risk  are  entitled  to  some  consideration  and 
could  not  be  expected  to  make  a  low  rate  on  what  is  known  as  a  hazardous 


162       BOOKKEEPING  AXD  BUSINESS  MANAGEMENT 

risk.  The  law  of  average  and  competition  keeps  insurance  rates  at  a 
reasonable  basis. 

The  merchant  who  does  not  carry  insurance  will  find  his  credit 
restricted;  and  so  it  should  be.  Manufacturers  and  jobbers  who  place 
their  goods  in  the  hands  of  the  retail  merchant  cannot  be  expected  to 
assume  the  liability  of  loss  by  fire  in  addition  to  the  legitimate  risk  carried 
by  all  concerns  selling  on  credit  basis.  It  should  be  a  patent  fact  to  all 
merchants  asking  credit  favors  that  it  is  their  duty  to  protect  those  who 
extend  them  credit  and  who  aid  them  in  other  ways  to  make  a  success  of 
their  enterprises." 

In  many  cases,  where  merchants  have  suffered  a  total  loss  by  fire, 
it  has  developed  at  a  later  date,  when  these  same  parties  were  trying  to 
make  a  new  start  and  asking  aid  from  the  jobber  and  manufacturer,  that 
the  matter  of  fire  insurance  had  never  been  properly  brought  before  them, 
and  it  was  due  to  ignorance  on  their  part  rather  than  intention  that  they 
had  not  availed  themselves  of  the  protection  offered  by  the  insurance 
companies." 


CHAPTER    XXII 

Trade  Acceptances 

FOR  generations  business  in  Europe,  by  means  of  trade  acceptances, 
has  been  done  in  such  a  satisfactory  manner,  that  our  greatest 
economists  have,  for  years,  advocated  the  establishment  of  a 
Central  Bank  in  this  country,  modeled  on  the  lines  of  those  abroad,  but 
with  advantages  adapted  to  our  own  needs,  securing  the  benefits  of  sound 
credit,  without  in  the  least  disturbing  terms  and  time  of  payment  of 
obligations. 

Federal  Reserve  Bank 

After  full  investigation  by  competent  committees,  and  public  dis- 
cussion and  conference  by  every  element  of  business,  the  Federal  Reserve 
Bank  was  authorized,  and,  since  beginning  operations,  has  had  only  the 
most  favorable  endorsement  and  criticism  from  all  quarters. 

One  of  its  most  important  functions,  for  the  benefit  of  general  business 
and  a  remedy  for  any  threatened  panic,  is  discounting  Trade  Acceptances. 

Trade  Acceptances  Described 

A  Trade  Acceptance  is  simply  a  draft  drawn  against  a  shipment  of 
goods,  payable  at  the  usual  date  on  which  the  invoice  would  regularly  be 
due. 

Sometimes  the  goods  are  shipped  direct  to  the  buyer,  sometimes  on  an 
order  Bill  of  Lading. 

Example 

If  you  are  an  old  customer  and  bought  a  bill,  say  of  hardware,  which 
by  terms  of  sale  was  due  and  payable  in  sixty  days  from  date  of  shipment, 
with  the  privilege  of  deducting  2  per  cent  within  ten  days  from  date,  the 
seller  would  ship  you  the  goods  and  mail  you  the  invoice  or  bill  for  same 
accompanied  by  the  Bill  of  Lading  or  shipping  ticket.  He  would  send 
with  these  papers  a  trade  acceptance  or  draft  drawn  on  you  for  the  amount 
of  the  bill,  due  sixty  days  after  date,  payable  to  the  order  of  the  shipper, 
with  request  to  accept  same  by  writing  your  name  across  the  acceptance, 
with  date  and  place  at  which  you  wished  draft  presented  for  payment  when 
due. 

163 


164       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

He  may  also  remind  you  that  you  have  the  privilege  of  discounting 
the  bill,  in  which  case  you  simply  send  him  exchange  for  the  net  amount 
or  the  bill  less  the  discount. 

If  you  are  a  new  customer  you  may  agree  to  have  the  goods  shipped 
"  Shipper's  Order."  In  this  case  the  goods  are  so  shipped  —  the  invoice 
sent  you  —  the  acceptance  for  amount  and  terms  of  sale  is  attached  to  the 
Bill  of  Lading  and  sent  to  some  bank  in  your  town  with  request  to  present 
same  to  you  for  acceptance. 

If  you  accept  the  draft  by  signing  your  name  in  proper  place  and  till- 
ing in  the  date  and  place  at  which  you  wish  to  have  it  presented  for  pay- 
ment when  due  —  the  bank  will  hand  you  the  Bill  of  Lading  attached  — 
on  which  you  can  get  the  goods. 

When  sending  the  draft  the  seller  usually  notifies  the  bank  of  terms 
of  discount  to  be  allowed  if  paid  within  the  time,  usually  ten  day-,  and  to 
accept  the  amount  of  the  draft  less  the  discount  stated,  and  then  deliver 
the  documents  on  which  proper  notation  of  the  transaction  has  been  made. 

Reason 

Your  acceptance  of  the  draft  does  not  increase  the  debt  one  cent,  and 
only  changes  it  from  an  open  account  to  one  closed  by  acceptance;  the 
amount  in  either  case  to  be  paid  when  the  debt  is  due. 

The  seller  is  relieved  of  the  burden  of  advancing  large  sums  to  his 
customers  and  being  obliged  to  await  their  convenience  in  paying  it  back. 

A  bill  of  goods,  sold  on  time,  is  the  same  as  advancing  that  much 
money  or  granting  a  loan  for  the  time  stated. 

In  Europe,  practically  every  bill,  sold  on  time,  is  settled  by  a  trade 
acceptance,  to  the  mutual  satisfaction  of  buyer  and  seller. 

Why  Should  Customer  Accept? 

The  customer  should  realize  that  every  sale  on  time  is  a  contract  to 
pay  that  amount  due,  at  a  certain  date,  and  by  "  acceptance  "  simply  puts 
in  writing  his  verbal  agreement,  nothing  less,  nothing  more.  If  the  whole- 
saler is  willing  to  hand  over  a  part  of  his  goods,  which  is  the  equivalent 
of  money,  to  be  paid  for  at  a  future  date,  it  is  but  fair  that  the  retailer 
should  furni>h  him  with  a  paper,  on  which  a  bank  would  advance  the 
money,  with  which  the  wholesaler  could  pay  for  the  goods  parted  with,  for 
the  wholesaler  must  also  pay  his  debts. 

The  customer  is  not  asked  to  pay  one  cent  of  the  bill  until  due,  and, 
as  the  acceptance  is  due  on  the  same  date  that  the  bill  for  which  it  is  given 
would  have  been  due,  no  favor  is  asked  bv  the  wholesaler. 


TRADE  ACCEPTANCES 


165 


If  you  have  been  favored  by  a  loan  of  goods,  reciprocate  by  furnishing 
paper  which  the  seller  can  use. 

For  example: 

If  the  Enno  Hardware  Company  ships  to  Robert  Bell  &  Co.  a  bill 
of  November  29th  for  $158.20  —  60/2,  and  Enno  draws  a  draft  as 
follows: 


N 


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z 


1 


sUS 


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191 0  No.     2S~ 


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Fig.  54  —  Trade  Acceptance 

If  goods  are  shipped  "  to  order,"  Enno  mails  the  draft  to  Exchange 
Bank,  Columbia,  with  instructions  to  present  for  acceptance  and  return, 
unless  Bell  prefers  to  discount  same,  in  which  event  there  may  be  2  per 
cent  deducted  from  face  of  the  draft,  which  may  then  be  surrendered  to 
Bell,  as  $155.04  cash  and  $3.16  discount  pays  the  $158.20. 


Entered  on  the  Books 

If  Bell  does  not  wish  to  discount,  but  take  full  time,  the  procedure 
is  as  follows: 

Upon  presentation  Bell  compares  amount  and  date  of  draft  with 
invoices,  notes  on  invoice  "  Paid  by  Acceptance,"  1/15,  60/d,  No.  25,  and 
on  bill  book: 


BILL3        PAYABLE 

Date 

No. 

Maker   or  drawer 

Favor   of 

Whera 
payable 

Amount 

Time 

Due 

Remarks 

OUh 

Is 

/aa^am  ■'nrW^to 

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7 

— r- 

b- 

Fig.  55  — Bill  Book 


166       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

and  across  the  face  of  the  draft  Bell  writes  "  accepted,*'  signs  the  firm  or 
corporation's  name,  as  the  case  may  be,  and  dates  it. 

Bell  then  returns  the  draft  to  the  bank. messenger  and  enters  on  the 
due  date  of  his  diary,  or  page  of  January  28th: 

'  No.  25  —  Enno  acceptance,  1 1/29  —  S158.20  due  to-day." 

Journal  Entry 
He  enters  on  Journal : 

December  8th  

Enno  Hardware  Company,  l)r SI  58.20 

To  Bills  Payable: 
For  acceptance  No.  25,  11/29/60,  d/d,  in  payment  for  invoice 

H/29 ' 158.20 

,  Posting 

and,  6 

Posts  the  entry,  debiting  Enno  on  their  ledger  a/c 158 .  20 

Crediting  bills  payable 158.20 

Bills  Payable  is  credited,  because,  when  a  draft  is  accepted,  it  is  a 

written  promise  to  pay  or  a  Bill  Payable  and  assumes  the  debt. 

Discounting;  Set  No.  2 

On  the  other  hand,  if  Bell  prefers  to  discount  it,  he  sends  check 

to  the  bank  for $155.04 

having  deducted  discount,  2'/< ,  per  agreement 3.16 

to  settle  the  draft,  which  is  handed  Bell 1  58 .  20 

and  charges  in  this  case  in  Cash  Book  same  as  (Fig.  22, 
page  93), 

12/8,  Enno  Hardware  Co.  paid  acceptance  for.  .  .  .    $158.20 

put  in  Amount  Paid  column 155.04 

put  in  Discount  Received  column 3.16 

Same;  Set  No.  3 

or,  if  using  voucher  system  charge  on  Cash  Book  (  Fig.  33,  i 

page  127), 

"  Vouchers  Audited,"  No.  494,  Enno  '"Acceptance  " $158.20 

put  in  Amount  Paid  column 1  55  .  04 

put  in  1  Hscount  Received  column 3  .  1  6 

and  voucher  marked  "  Paid  by  Acceptance,"  and  canceled  draft  pasted  to 
voucher. 


TRADE  ACCEPTANCES  167 

If  not  Paid  Until  Due 

When  the  acceptance  is  allowed  to  run  or  only  to  be  paid  when  due, 
after  having  made  out  the  voucher,  a  journal  entry  is  made  as  follows: 

December  8th  

Vouchers  Audited,  Dr $158.20 

To  Bills  Payable 158.20 

Voucher  No.  494  settled  by  acceptance  No.  25 158 .  20 

Enno,  11/29,  and  voucher  marked  "  Paid  by  Acceptance  "  and  filed, 
crediting  Bills  Payable,  because  you  have  shifted  the  burden  of  your  debt 
to  Bills  Payable,  and  debiting  "  Vouchers  Audited,"  because  that  voucher 
which  assumed  the  debt  is  no  longer  responsible  for  it,  since  the  burden  is 
now  assumed  by  the  acceptance  which  must  be  paid. 

When  the  acceptance  is  due,  it  will  be  found  at  the  bank  to  which  it 
was  sent  for  collection,  and  when  paid,  is  charged  on  the  cash  book  to 
"Bills  Payable  "  account,  just  as  any  other  note  paid. 


CHAPTER    XXIII 


Stock  Record  to  Show  Purchases,  Sales   and 

Stock  on  Hand 

THERE  are  many  elaborate  methods  of  keeping  account  of  the 
articles  bought  and  sold,  also  the  stock  on  hand,  and  a  simple  one 
is  shown.     (  Fig.  56A.) 
Any  loose  leaf  cover,  most  convenient  for  your  needs,  of  a  stock  size, 
that  sheets  to  fit  may  at  any  time  be  procured,  is  suggested. 

Columnar  sheets  are  usually  kept  for  sale  by  all  first-class  -tationers. 
If  ruled  in  columns  of  dollar.-  and  cent.-,  u-e  for  quantities  that  por- 
tion ruled  with  unit  lines  or  for  dollars  and  use  the  cents  column  for  dates. 
The  dates  are  usually  in  figures,  as  "ill  for  July  2nd,  10  IS  for  October 
15th,  etc. 

In  the  left-hand  corner  write  the  headings  or  designation,  as  follows: 

First  Line,  Stock,  being  stock  on  hand. 

Second   Line,    Received    or    Bought,   being   quantity    purchased    or 

received. 
Third  Line,  Total,  being  amount  of  stock,  and  quantity  bought,  in 

one  total. 
Fourth  Line.  Sales,  being  the  sale-  since  the  last  count. 
Fifth  Line,  Stock,  being  the  count  of  stock,  just  made. 


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6.\  —  Stock   Record 

16S 

STOCK  RECORD  TO  SHOW  PURCHASES,  ETC.,  ON  HAND     169 

And  continue  this  order  by  writing  the  same  sets  of  four  on  the  lines 
all  down  the  page,  so  that  if  the  page  has  thirty-three  lines,  you  are  pre- 
pared to  record  eight  different  counts  of  stock,  at  eight  different  dates,  for 
any  one  of  the  columns  or  stock  on  every  fourth  line  after  the  first  balance. 

Starting  with  the  inventory  count,  enter  on  the  first  line  stock  the  date 
and  quantity  on  hand,  and  when  goods  are  received  enter  on  second  line 
the  date  and  quantity  received,  then  add  "  Receipts,"  line  2,  the  amount  of 
"Stock,"  line  1,  writing  on  line  3  the  Total,  which  would  be  the  stock 
then  on  hand,  if  no  sales  or  withdrawals  had  been  made. 

On  the  5th  line,  "  Stock,"  enter  date  and  quantity  of  stock  now  actu- 
ally on  hand  or  just  counted  and  deduct  that  amount  (the  present  stock) 

from  the  "  Total  "  on  line  3,  putting  this  difference  or  Sales,  in  line  4. 

Because  if  you  started  with  a  certain  quantity line  1 

and  add  what  has  been  "  received  since  " "  2 

the  total  would  be  the  quantity  on  hand : "  3 

but  if  you  count  your  stock  and  deduct  that  quantity "  5 

from  the  total "  3 

the  difference  will  be  quantity  used  for  sales  or  taken  out  of  stock  "  4 

The  stock  in  any  one  column  being  for  that  separate  article  can  be 
taken  and  entered  independently  of;  or  without  conflict  with  any  other 
column. 

Usually  goods  of  same  class,  but  different  brands  or  weights  are  put 
on  same  page  in  separate  columns  for  the  purpose,  or  may  follow  on  the 
pages  of  the  same  subdivision. 

Thus,  we  had  (Fig.  56 A), 

Stock        10  Boxes  xxxx  Soap  when  inventory  was  taken. 

Received     5       "         "         "       on  January  27. 

Total        15  "or  stock  and  quantity  received  since. 

Stock  6  "       on  January  30th,  as  checked  up  by  one 

of  the  clerks,  and  by  deducting  6  from 
15  we  find  that  we  have  sold  9. 

Sales         ~9       "         "         "       We  sold  between  Jan.  1  and  Jan.  30,  9; 

but  instead  of  putting  the  figure  9,  the 
amount  sold,  under  the  6  on  the  Stock 
Record,  we  place  it  on  the  line  "  Sales  " 
or  "  Sold." 

When  a  box  of  soap  is  opened  and  contents  put  on  the  shelves  for 
sale,  we  consider  that  box  as  having  been  taken  out  of  stock,  so  far  as  the 
record  goes,  because  we  take  a  box  as  the  unit  and  do  not  count  the  separate 
cakes  or  part  of  the  contents  of  any  original  package,  as  it  would  be  end- 


170       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

less  detail,  but  by  taking  count  only  of  original  packages  or  cases,  the 
task  is  light  and  the  results  of  any  one  period  embraces  all  the  goods  sold. 
The  small  quantity  or  the  broken  packages  on  hand  at  the  beginning  will 
about  equalize  the  amount  at  end  of  the  period.  If,  however,  we  handle 
articles  which  are  valuable  or  bought  singly,  or  wish  to  check  any  stock  by 
article,  it  can  easily  be  done  if  desired  by  arranging  or  listing  by  article 
on  the  Stock  Record. 


Can  Order  Intelligently 

When  we  know  how  many  cases  or  packages  have  been  sold  in  a 
given  time  and  how  many  are  now  in  stock,  we  can  regulate  our  purchases, 

or  contract   for  supplies  to  cover   a   certain  period,   with   much   greater 
accuracy. 

Relying  on  Traveling  Salesmen 

I  have  known  merchants  who  not  only  had  no  idea  of  the  quantities 
sold,  but  did  not  know  their  immediate  requirements,  and  when  some  trav- 
eling salesman  would  arrive,  he  was  asked  to  "  go  back  and  look  over  the 
stock  and  send  what  you  think  we  need." 

In  many  such  cases  the  salesman's  judgment  and  experience  may 
have  been  of  great  benefit,  but  in  others,  it  might  be  expressed  in  the  old 
Arab  saving:  "  Save  me  from  my  friends,  for  they  have  done  me  up." 
You  must  rely  upon  your  own  judgment  if  you  would  be  successful. 

Shows  Slow  Sellers 

The  stock  record  acts  as  a  dragnet  to  bring  to  light  the  "  stickers  "  or 
slow  sellers,  the  experiments,  the  goods  which  fail  to  repeat  and  cases  of 
■  mistaken  judgment. 

Minimum  and  Maximum 

Many  merchants  try  to  fix  a  minimum  or  the  lowest  quantity  which 
must  be  on  hand,  and  a  maximum,  or  the  largest  quantity,  above  wli 
it  should  never  accumulate,  and  note  these  figures  in  the  upper  corner  that 
the  buyer  may  see  when  in  line. 

More  Detailed  Record 

Should  the  business  justify  -bowing  every  purchase,  the  article  on 
everv  sale  and  the  balance  at  all  times,  which  should  be  independent  of 
taking  stock  or  count,  though  capable  of  easy  proof  by  comparing  at  any 


STOCK  RECORD  TO  SHOW  PURCHASES,  ETC.,  ON  HAND  1 7 1 

time  with  a  count  of  stock,  we  could  have  a  more  detailed  record,  with 
special  rulings  and  use  a  page  for  each  separate  article  to  be  traced  or 
watched.     (Fig.  56B.) 


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—  Stock  Record 

^J 

Is 

The  ruling  like  a  ledger  has  a  debit  or  "  goods  received  "  space  on 
the  left-hand  portion  of  the  page  and  goods  out,  or  withdrawn  from  stock, 
on  the  right-hand  of  page  and  in  the  center  a  column  for  balance  or  stock 
now  on  hand. 

In  this  case  the  deliveries,  or  "  goods  out,"  are  taken  from  the  carbon 
copies  of  bills  shipped  and  the  balance  or  difference  between  receipts,  or 
"  goods  in  "  and  the  withdrawals  or  "  goods  out,"  made  daily. 

In  the  space  "  received  from  "  is  usually  written  the  purchase  num- 
ber and  sometimes  the  name  of  the  seller  as  the  "  goods  received  "  are 
entered  from  the  invoices.  In  space  "  Order  No.,"  on  the  credit  side,  the 
number  of  the  shipping  order,  if  every  article  is  to  be  accounted  for,  or  the 
number  of  the  stockman's  report  which  he  issues  when  original  packages 
are  to  be  accounted  for. 

This  requires  a  report  from  the  stock  clerk  whenever  a  package  is 
opened  for  supplying  the  shelves  or  to  be  shipped. 

If  each  article  of  the  contents  of  a  case  is  to  be  followed  the  detail 
is  too  great  for  a  small  business,  but  can  be  arrived  at  by  the  form.  (Fig. 
S6A,  page  168.) 


T 


CHAPTER    XX I Y 

House  Cost  and  Price  Book 

HE  majority  of  merchants  rely  almost  solely  upon  memory  for 
prices  and  often  pay  very  dearly  for  it. 


Description 

A  little  loo>e  leaf  price  book,  of  a  size  and  capacity  depending  upon 
the  requirements,  with  index  sheets,  is  ideal  for  the  purpose,  as  the  sheets 
are  removable  and  may  be  inserted  where  needed  and  no  disappointment 
re>ult.  as  in  a  bound  price  book,  where  the  estimated  apportionment  of 
sheets  to  any  one  letter,  often  prove.-  insufficient. 

The  sheets  usually  have  four  ruled  columns,  though  any  other  stock 
ruling  could  be  selected. 

Arranging 

All  articles  or  classes  beginning  with  the  same  letter  are  on  one  or 
more  sheets  just  before  the  index  of  that  letter;  thus  "  soaps  "  would  be  just 
before  the  index  letter  "  S,"  "  coffee  "  just  before  the  index  "  C." 

The  index  sheets  are  simply  guides  to  separate  the  others  and  are 
never  written  upon.  They  should  outlast  several  sets  of  other  leaves. 
(  Fig.  57.) 

These  four  columns  are  used  according  to  the  judgment  of  the  user. 
Many  begin  at  the  left-hand  side  of  the  sheet,  write  the  date  that  there  be 
no  <|iie^tion  when  it  was  placed  there,  next  the  name  and  description  of  the 
article,  and 

In  the  First  Column  the  invoice  cost; 

In  the  Second  Column  the  cost  and  expense  in  one  amount; 

In  the  Third  Column  the  selling  price  in  cjuantities  as  dozen,  case, 
hundreds,  etc.; 

In  the  Fourth  Column  the  selling  price  at  retail  or  for  one  or  a  few 
of  the  articles. 

Others  Use 
The  First  Column  for  list  price; 

172 


HOUSE  COST  AND  PRICE  BOOK 


173 


The  Second  Column  for  trade  discount; 
The  Third  Column  for  net  invoice  cost; 
The  Fourth  Column  for  selling  price. 

If  desired  leaves  of  six  columns  can  be  purchased. 

Similar  brands  of  goods  are  usually  written  one  below  the  other. 


-vD-^covrLLzC  ~v7&<rvLd 


V/.<jifasUc 


Ctr< 


//jroiu 


Cost 
I lid  isn* 


6£Li. 


C/)S£ 


C/)M 


3 


O 


/(f-O 

tn'A 


Fig.  57  —  Cost  and  Price  Book 


The  projecting  letter  C  is  the  tab  on  the  index  sheet  which  is  just 
behind  all  pages  on  which  articles  begin  with  C,  as 

Candies, 

Candles, 

Canned  goods, 

Cereals, 

Cheese,  etc. 

To  Allow  Change  in  Price 

The  price  book  is  usually  written  up  in  hard  pencil  to  avoid  smean'ng 
from  use  and  to  allow  of  erasure  should  the  prices  change  and  new  prices 
put  in,  though  many  write  again  the  new  prices  for  reference  or  compari- 
son and  draw  a  light  line  through  the  old. 

If  in  doubt  about  arranging  your  price  book,  consult  some  bright 
traveling  salesman  who  may  have  his  own  price  book. 

No  matter  what  method  you  use,  a  convenient  record  of  cost  and 
selling  prices  will  save  you  much  time,  eliminate  worry  and  avoid  many 
useless  disputes. 

To  Guard  Against  Spoiled  or  Swollen  Goods 
Some  mark  each  can  or  other  perishable  goods  with  the  date  of  month 
and  year  purchased,  in  light  pencil  figures  —  such  as  "  6/16,"  for  "  June, 
1916  "  —  that  they  may  quickly  note  how  long  the  goods  have  been  in 
stock  and  be  guided  in  disposing  of  them  before  deterioration  or  total  loss 
ensues,  especially  on  canned  goods,  etc. 


CHAPTER    XXV 

Want  Book,  or  Memo,  of  Goods  Needed 

DO  IT  NOW  "  is  a  quotation  staring  at  us  from  many  signs, 
and   in  no  case  is   it   more   applicable  than  to   note   without 
delay   at    the   time   you    learn    it,    that    the   stock   is    running 
short,  otherwise  a  poor  memory  may  prove  costly. 

Danger  of  Being  Out  of  Goods 

When  stock  of  any  article  in  general  demand  runs  low  a  slight  delay 
in  ordering  may  result  in  complete  exhaustion  of  a  supply  at  a  most 
unfortunate  time,  resulting  in  dissatisfaction  to  more  than  one  good  cus- 
tomer. You  not  only  lose  that  sale,  but  the  prompt  service  of  a  more  far- 
sighted  competitor  may  be  the  means  of  your  losing  a  regular  and  valued 
customer. 

Instructions  to  Clerks 

Make  it  a  rule  that  each  clerk  note  the  condition  and  supply  of  goods 
he  is  then  selling,  whenever  they  are  near  the  danger  line,  and  write  in 
the  "  Want  Book  "  the  date,  articles  needed  and  quantity  then  on  the 
shelves,  and  not  depend  on  a  memory,  which  is  at  all  times  of  a  busy  day 
burdened  with  matters  which  cannot  be  so  easily  jotted  down. 

Description 

Some  merchants  have  a  specially  ruled  book  with  printed  headings 
for  the  purpose,  but  a  common  grocer's  pass  hook,  properly  marked  in  bold 
letters  on"  the  cover,  will  answer  for  all  practical  purposes.  Hang  by  a 
string  in  some  central  location  where  the  clerks  may  have  easy  and  quick 
access  to  it. 

If  necessary  you  may  have  several  "  Want  Books,"  one  for  each 
department.  Each  book  should  be  so  tied  that  it  remains  in  place,  and 
under  no  circumstances  allow  it  to  be  removed  until  used  up. 

Watch  the  Want  Book 
The  manager's  duty  is  to  examine  regularly,  each  day,  the  memoranda 

174 


WANT  BOOK,  OR  MEMO.  OF  GOODS  NEEDED         175 

and  make  note  of  same.  He  then  usually  draws  a  line  through  the  nota- 
tions and  pencils  his  initials,  as  evidence  that  the  matter  has  received  his 
attention. 

Issue  positive  instructions  that  this  book  must  be  used  for  the  one 
purpose  and  have  the  clerk  who  makes  his  notation  of  wants,  give  his 
reasons  why  goods  should  be  ordered  as  briefly  as  if  writing  a  cablegram 
and  sign  his  name  or  initials,  with  date. 

The  opinion  of  the  man  behind  the  counter  may  sometimes  prove  most 
valuable;  he  lives  with  the  goods,  some  proprietors  only  visit  among  them. 

Ordering 

The  needed  goods  are  either  included  in  the  next  order  or  ordered  to 
be  shipped  at  once,  depending  upon  circumstances.  Watching  this  little 
book  should  reduce  the  cases  of  "  We  are  just  out  of  it,"  to  a  minimum. 

Some  merchants  use  a  want  book  with  sheets  so  perforated  that  they 
may  be  easily  detached  from  the  stub;  others  a  loose  leaf  memorandum 
book,  and  assemble  the  used  sheets  in  preparing  their  orders,  preferring 
this  method  to  that  of  copying  from  the  want  book  which  must  always 
be  in  place.  These  detached  sheets  are  filed  for  future  reference  and  are 
valuable  evidence  of  the  good  or  bad  judgment  shown  by  the  clerk  in 
charge  of  that  counter  or  department. 

When  purchases  have  been  made  which  proved  exceptionally  fortu- 
nate, do  not  hesitate  to  promptly  and  frankly  admit  it  and  compliment 
or  commend  that  clerk  for  his  keen  interest  in  the  business  and  his  rare 
understanding  of  conditions.  Judicious  expression  of  appreciation  when 
deserved  is  a  splendid  mental  tonic. 

Do  not  use  common  pads,  from  which  a  stray  gust  of  wind  may  blow 
a  very  important  memorandum,  use  a  book. 


CHAPTER    XXVI 

Miscellaneous 

Trade  Papers  and  Books  on  Shop-Keeping 

THERE  are  many  excellent  books  on  buying  and  selling,  care  of 
stock,  deliveries,  rules  for  employees,  etc.,  etc.,   and  hardly  a 
month  passes  without  one  or  more  articles  on  one  of  these  subjects 
appearing  in  the  trade  papers. 

If  you  are  interested  in  knowing  what  the  other  fellow  has  tried 
and  found  suitable  to  his  wants,  or  thinks  along  the  same  line  you  may 
be  investigating,  write  a  letter  to  some  trade  journal  asking  what  books  and 
articles  are  published  on  that  subject  and  where  they  may  be  procured. 

Should  you  begin  to  investigate,  it  is  almost  a  certainty  that  you  will 
not  stop  at  one  little  book  nor  be  satisfied  to  "  let  well  enough  alone,"  but 
will  strive  to  be  the  best  equipped  for  your  chosen  profession. 

Neatness  and  Order 

There  is  one  little  rule  that  I  have  seen  enforced  that  somewhere  may 
have  been  published,  but  from  the  condition  prevailing  in  many  stores, 
I  think  their  owners  have  never  seen  it  mentioned  in  print. 

If  you  would  have  the  store  present  the  best  appearance  let  the  main 
shelves  show  that  most  noticeable  condition,  of  being  all  in  even  alignment, 
not  a  can  or  package  awry  or  a  line  broken. 

As  the  goods  are  placed  in  rows  of  three  or  four  deep  on  the  shelves, 
they  may  always  show  good  order,  in  replacing  any  one  taken  down,  by 
moving  another  from  behind  and  lining  it  up  with  the  front  row. 

Let  this  be  done  before  the  clerk  turns  away  from  the  shelf. 

If  you  have  never  tried  it,  one  experiment  will  win  you  over  for  all 
time. 

Life  is  made  up  of  trifles  and  it  is  just  such  trifles  as  these  which  leave 
a  lasting  impression  on  a  customer. 

Neatness  is  a  well-paying  investment  when  dealing  with  the  public, 
and  that  condition  has  more  influence  with  the  customer  than  can  be 
calculated  in  dollars  and  cents. 

Encourage  your  clerks  to  take  an  interest  in  your  business,  not  by 

176 


MISCELLANEOUS  177 

preaching  as  much  as  by  consultation  or  discussion.  Have  a  suggestion 
box  into  which  any  clerk  is  invited  to  drop  a  note  of  not  only  reforms 
which  may  occur  to  him,  but  ideas  which  strike  him  as  conducive  to 
increased  sales,  reparation,  economy  of  time;  supplies  management,  relief 
hours,  displays,  pushing  certain  goods,  moving  slow  stock  or  stickers, 
cultivating  more  cordial  relations  with  certain  critical  customers,  and 
among  his  fellow  employees.  Let  these  questions  be  read  in  full  at  stated 
regular  periods  —  omitting  the  names  until  placed  before  the  meeting  — 
which  may  be  arranged  for  a  full  attendance  of  your  employees,  and  when 
displaying  merit  or  excellence,  announce  the  name  and  let  a  suitable  reward 
be  announced. 

When  a  question  is  debatable  place  it  before  the  meeting  for  dis- 
cussion and  you  may  find  what  seems  desirable  but  at  the  moment  imprac- 
tical, may  have  a  solution  from  the  most  unexpected  quarter.  Such 
stimulation  may  turn  the  tide  from  an  uncertain  immediate  outlook  to  one 
of  unexpected  improvement  and  be  the  beginning  of  a  new  era  in  your 
affairs.  A  modest  monthly  dinner  occasionally  may  work  wonders  in  co- 
operation and  successful  management. 

Quality  and  Service 

Study  the  needs  of  your  customers. 

Let  quality  and  service  be  the  factors  not  only  to  hold  the  trade  you 
now  enjoy,  but  to  quietly,  surely  and  persistently  present  the  evidence 
which  will  be  spread  far  and  wide  by  satisfied  and  appreciative  customers. 

Loose  Leaf  vs.  Bound  Books 

Should  the  volume  of  any  business  justify  it,  every  book  described 
herein  could,  to  advantage,  be  replaced  by  loose  leaf,  but  should  not  until 
you  understand  how  to  get  the  best  use  of  them. 

Ask  any  farmer  if  he  would  discard  the  mowing  machine  and  go 
back  to  the  scythe. 

He  will  tell  you  that  until  he  learned  what  it  would  not  do  and  what 
he  found  it  could  do  well,  he  hesitated,  but  when  he  knew  the  advantages, 
its  weak  points  to  be  guarded  against  and  how  to  get  the  most  out  of  it, 
he  hesitated  no  longer  and  would  never  think  of  going  back  to  the  old  way. 

If  you  knew  nothing  about  accounts  before  reading  this  and  can 
now  keep  your  own  books  or  understand  the  intricate  reports  of  your  busi- 
ness when  handed  to  you,  there  need  be  no  question  what  you  would  reply 
to  any  question  as  to  system. 

The  principles  of  bookkeeping  are  absolutely  fixed,  but  the  applica- 
tion of  those  principles  can  be  so  varied  that  they  may  be  arranged  to  suit 


178       BOOKKEEPING  AND  BUSINESS  MANAGEMENT 

any  business  —  no  matter  how  small,  no  matter  how  large;  for  if  a  business 
is  worth  conducting  its  results  are  worth  recording,  and  when  properly 
done  should  give  you  an  accurate  knowledge  of  the  facts  at  any  time. 

You  will  then  be  in  a  position  to  discover  any  leaks  and  to  apply  the 
remedy,  for  the  more  promptly  they  are  discovered,  the  less  the  loss. 

Avoid  "  red  tape  "  and  never  sacrifice  necessary  details  for  the  sake 
of  brevity. 

When  planning  a  system,  first  consider  what  information  you  should 
have  at  any  future  time,  and  then  arrange  your  books  accordingly  that  the 
questions  may  be  fully  answered  in  all  details  without  delay  or  additional 
labor. 


Glossary 


Acceptance.  "  When  a  draft,  due  at  a  future  date,  is  drawn-  by  a  seller  of 
the  goods  upon  one  who  is  owing  him  money,  and  the  Debtor  writes 
across  the  face  of  the  draft  'Accepted  '  and  signs  his  name,  which  is  an 
acceptance  of  the  terms  of  the  draft  or  promise  to  pay  same  on  the  date 
mentioned,  it  is  called  an  acceptance.     (P-)  " 

Account.  "A  record  of  transactions  by  date,  description  and  amount. 
Accounts  may  be  divided  into  two  classes : 

1.  personal  accounts  which  relate  to  persons,  as  John  Wilson,  Robt.  Bell, 

Eaton  Gro.  Co. 

2.  impersonal     or     general     accounts     sometimes     called     representative 

accounts,  of  which  the  heading  or  style  of  the  account  represents 
or  explains  its  nature,  and  this  class  is  divided  in.to 

a.  property  accounts   relating  to  the  assets  of   the   business,   such  as 

Cash,   Merchandise,  Real   Estate,   Fixtures,   etc.,  and 

b.  revenue   accounts,    such    as    Profit   and    Loss,    Surplus,    etc.,    and    the 

debits   to   revenue,    such    as    Expense,   Taxes,    Insurance.   Wages, 
Interest,  etc.     (P.)" 

Accounts  Payable.     "  Debts  due  by  the  concern  to  others.     (P.)  " 

Accounts  Receivable.  "  Debts  due  the  concern  by  individuals,  most  gen- 
erally for  goods  bought  and  not  yet  paid  for.     (P.)  " 

Adding  Machine.  "A  mechanical  adder  operated  by  keys  to  record  each 
amount  and  totals  of  same.  The  more  expensive  ones  also  record  date, 
amount,  debit,  credit,  debit  totals,  credit  totals  and  either  debit  or  credit 
balance,  etc. 

Assets.     "  Property  of  any  description.     (P.)  " 
Assets  may  be  divided  into  two  classes, 

1.  that  with  which  business  is  carried  on  as  Real  Estate,  Dray  Stock,  etc. 

2.  that   in    which   business   is  carried  on,  as   Cash,  accounts  receivable, 

notes,    merchandise,    etc.;    the    former    is   fixed,   the    latter    current. 
Wasting  may  reduce  their  value  also. 

Fluctuaton  may  increase  or  decrease  the  value.     (D.)     See  Fluctua- 
tion.) 

Balance.     "  Difference  between  a  smaller  and  a  larger  amount." 

Balance  of  Account.     "  Usually  ledger  balance  is  the  difference  between  two 

side  of  an  account.     (P.) 

It  is  first  writtten  on  the  lesser  of  the  two  sides  to  make  both  sides  or 

total  equal,  but  afterwards  brought  down  to  the  opposite  side,  because  the 

balance  belongs  to  the  side  which  is  greater.     (P.) 


D. — ■  Dicksee-Montgomery. 
P. —  Pittman-Porters. 

179 


180  GLOSSARY 

Balance  of  Account  —  Continued. 

Credit  Balance  is  the  amount  by  which  the  credit  side  of  an  account 
exceeds,  or  is  greater,  than  the  debit  side.  Credit  balances  are 
either  liabilities  or  gains ; 

a.  if  they  represent  debts  due  by  the  concern  they  are  liabilities; 

b.  if  they  represent  income  they  are  gains.     (P.) 

Debit  Balance  is  the  amount  by  which  the  debit  side  of  an  account  is 
larger  than  the  credit  side.  Debit  Balances  are  either  assets  or 
losses, 

a.  if  they  represent  property  bought  by,  or  debt  due  the  concern  by 

individuals,  they  are  assets; 

b.  if  they  represent  expenses  they  are  losses.     (P.)  " 

Balanced.     "An  Account  is  said  to  be  balanced  when  the  totals  of  both  sides 

agree  or  are  equal.     (P.)  " 
Bills    Payable.     "  Notes    given     by    the    Concern    distinguished     from    the 

accounts,  which  latter  are  due  on  open  account.     (P.)" 
Bills  Receivable.     "Notes  given   the  concern  by  others,  usually  for  goods 

purchased.    In  such  cases  the  customer's  account  is  credited  by  the  amount 

of  the  note  and  Bills  Receivable  is  debited  and  when  cash  is  paid  on  the 

note.  Hills  Receivable  is  then  credited.     (P.)  " 

Capital.  "The  difference  between  what  that  business  possesses  and  what  it 
owes,  and  sometimes  separated  into  two  accounts,  one  called 

a.  capital  or  the  amount  which  is  to  be  retained  in  the  business,  and  the 

other 
1).  surplus,  the  balance,  usually  to  the  credit  of  Profit  and  Loss  account, 
which  is  available  for  distribution.     (P.)  " 

Capital  Expense.  "Any  amount  spent  in  acquiring  assets  for  the  purpose 
of  earning  income  or  increasing  the  capacity  of  the  business,  such  as 
lands,  buildings,  dray  stock,  tools,  etc.     (D.)  " 

Capital  Stock.  "  In  corporations  the  capital  is  the  capital  stock,  or  amount 
subscribed  or  paid  by  the  Stockholders,  with  which  the  business  is  con- 
ducted, and  the  amount  appears  on  the  books  as  a  liability,  because  it  is 
a  debt  owing  the  Stockholders  who  contributed  it  to  carry  on  the  busi- 
ness.    (P.)  " 

Carry  an  Amount  Over.  "  To  transfer  figures  from  one  book  or  place  to 
another." 

Cash  Register.  "A  machine,  provided  with  keys,  by  which  to  register  or 
record  any  sum  received  and  provided  with  drawers  or  compartments,  in 
which  money  or  papers  are  to  be  placed.  The  more  expensive  kind  are 
also  arranged  to  register  sales  made  by  each  salesman,  for  each  depart- 
ment, to  print  a  ticket  of  each  transaction,  show  separate  totals  of  each 
class,  and  are  adapted  for  many  distinct  purposes  and  businesses." 

Cash  Sale.     "  Goods  sold  for  cash  in  hand." 


D. —  Dicksce-Montgomery. 
P. —  Pittman-Porters. 


GLOSSARY  181 

Closing  Entries.  "  The  amounts  of  the  various  losses  and  gains  transferred 
from  the  revenue  or  expense  accounts  to  Merchandise,  Trading  account. 
Profit  and  Loss  account,  etc.     (P.)  " 

Corporation.  "  In  business  a  number  of  persons,  by  law  not  less  than  three, 
associated  under  the  laws  of  the  State  to  act  as  one. 

As  life  is  uncertain,  many  proprietors  foresee  the  contingency  of  death, 
which  in  the  case  of  a  firm,  terminates  the  business,  unless  otherwise 
specially  agreed  upon,  but  as  a  corporation  is  not  affected  when  an  officer 
or  a  stockholder  dies,  we  have  incorporated  companies,  sometimes  termed 
joint-stock   companies.      (D.)  " 

Cost.     "  Flat  cost  is  price  paid  jobber  or  seller. 

Prime  cost  is  flat  cost  phis  expense  of  laying  goods  down  in  store. 

Total  cost  is  Prime  Cost  plus  the  proportion  or  percentage  of  all  expenses. 

Selling  Price  is  Total  Cost  plus  the  percentage  of  profits  to  be  secured. 

(See  Profit.)  " 
Cost  Mark.     "Any  arbitrary  set  of  letters  or  marks,  by  means  of  which  any 

sum   or   set   of  figures   may   be   written,   legible   to    the   writer   or   others 

entitled  to  know,  but  not  understood  by  the  public. 

Thus  in  a  word  or  phrase  of  ten  letters,  numbering  each  letter  from  1  up 

to  0,  if  the  word  Blackstone  is  chosen  and  B.K.E.  is  written,  we  know  that 

B  is  the  first,  K  the  fifth  and  E  the  tenth  or  cipher  —  and  the  amount  is 

150. 

There  are  thousands  of  cost  marks,  some  of  the  more  common  are 
Blacksmith.  .  .Cash  profit 
Honest  Play. .Only  Square 
Hustle  Fair.  .Profitable,  etc. 

Some  use  hieroglyphics  or  figures,  as  two  lines  crossing  two  other  lines,  each 
compartment  representing  a  figure  and  X  being  O.   <- 


7 

and  written  JJ|_2J|_3_T].  |T][T7ir8ir9"    and_ 

be  150.     The  arrangement  or  order  of  the  figures  may  be  as  suits  the  user, 

running  up  and  down,  instead  of  across  the  diagram,  but  as  signs — right 
angles,  ±  horizontal  and  perpendiculars  are  not  so  easily  memorized  as  sim- 
ple words,  the  latter  are  generally  chosen.     -f-  (P.)  " 

A  Credit.     "The  amount  due  from  some  person  or  account,  to  another.  (P.)" 

Credit  Balance.     "  See  Balance." 

Credit  Memorandum  or  Credit  Ticket.  "A  slip  cf  paper  or  ticket  showing 
amount  due  by  the  concern,  either  for  goods  returned,  in  which  case  the 
date  of  return,  name  for  whose  credit,  the  transaction  briefly  stated  and  the 
amount, — or  particulars  of  some  other  debt." 


D. —  Dicksee-Montgomery. 

P. —  Pittman-Porters. 

P.  X  (after)  Pittman-Porters. 

-+-  Italicized  words  underscored  here. 


182  GLOSSARY 

Cross  Entries.     "  Made  either  to  transfer  an  amount,  or  to  correct  a  wronEr 

posting." 
Current  Assets.     "  Cash  on  other  property  acquired  for  purpose  of  sale  and 

conversion  into  cash.     (See  Assets.)     -\-  (P.)  " 

Debtor  (Dr.).     "  ( me  who  owes  money.     (P.)  " 

Debit  Balance.     "  See  Balance." 

Department  Books  "show  the  business  done  by  each  Department,  t he 
expense  of  carrying  on  the  business  in  each,  the  profit  or  loss,  as  the  case- 
may  l>c,  which  results.  When  results  arc  tabulated,  showing  totals  and 
carefull)  analyzed,  such  as  appears  out  of  proportion,  may  be  examined  to 
find  the  cause  and  have  the  remedy  promptly  applied. 

Depreciation  "is  the  gradual  decrease  in  values  of  an  asset,  from  any  cause. 
It  may  be  a  permanent  decrease  in  value,  not  merely  from  use  but  from 
any  other  cause.  The  reason  for  charging  depreciation  of  assets,  is  that 
they  may  appear  in  the  balance  sheet  at  their  true  value  at  that  date,  other- 
wise the  assets  would  be  overstated  and  the  balance  sheet  a  false  statement 
of  affairs.     ( Also  see  Fluctuation.)      (D.)  " 

Discount  "is  an  allowance  off  the  price  of  goods,  or  off  the  amount  of  an 
account,  also  the  interest  deducted  when  a  hank  'discounts'  a  note.  (See 
Interest.)  Cash  discount  is  a  deduction  allowed  for  a  payment  to  be  made, 
at  a  date  prior  to  the  time  when  the  full  amount  is  due.  Trade  discount  is 
an  agreed  amount  of  discount  allowed  dealers  from  the  face  of  the  published 
catalogue  price  or  rati-.  -\-  (P.)  " 
Dividend.  "A  share  of  the  profits  of  a  corporation,  -f  (P.)  " 
Draft.  "An  older  of  one  person  or  firm  on  another  to  pay  a  certain  sum  of 
money  at  a  specified  time." 

Enter.     "To    write    or    copy    an    entry    in    some    hook;    when    carried    from 

another  lumk  to  the  ledger,  it  is  termed  posting." 
Entry  or  Entries.      "  The  facts  and  figures  written  or  to  he  written." 

Fixed  Assets.  Those  assets  which  it  is  expected  to  keep  in  the  busim  ss 
for  the  purpose  of  earning  income  or  profit,  such  as  store  and  other  build- 
ings,   machinery,    horse   and    wagon,    etc.     (Also   see   Assets.)      ±    (D.)  " 

Fluctuation  "is  merely  the  accidental  variation,  owing  to  external  causes, 
in   the   value  of  certain   property  owned. 

By  fluctuation,  the  cost  of  fixed  assets  is  affected  by  the  loss  or  depre- 
ciation due  to  use,  and  such  loss  is  an  expense  and  should  be  deducted 
from  the  original  cost.     (See  Assets.)      (D.)  " 

Foot.  "To  add  two  or  more  sets  of  figures  and  write  or  check  the  total 
amount   of   same." 


D. —  Dicksce-Montgomery. 
P. —  Pitrman-Porters. 
D  ;+;  Dicksce-Montgomery. 
P.  +  Pittman. 


GLOSSARY  183 

Index.  "  Pages  alphabetically  arranged,  on  which  the  names  of  accounts 
and  pages  on  which  they  may  be  found,  are  listed,  each  under  its  proper 
letter  in  logical  order  for  ready  reference.  In  many  smaller  ledgers  the 
index  consists  of  the  first  few  pages  properly  lettered,  in  other  cases  the 
index  is  a  separate  book.  In  loose  leaf  ledgers  no  separate  index  is 
required,  because  the  leaves  are  all  arranged  alphabetically  and  the  sec- 
tions designated  by  lettered  division  sheets." 

Interest.  "  The  allowance  given  by  the  borrower  to  the  lender  for  the 
money  lent.     (P.)  " 

Inventory.  "A  list  of  goods  or  other  property  and  their  values  properly 
totaled.  The  inventory  value  of  goods  is  the  invoice  cost  plus  the  freight 
and  carrying  charges  necessary  to  place  them  on  the  shelves.  All  other 
expense  is  running  the  business  or  Shopkeeping  Expense,  therefore,  the 
inventory  should  be  taken  at  the  net  laid  dozim  cost  price,  unless  the  market 
is  lower,  then,  at  the  latter  price.  Ignore  cash  discounts  in  pricing  the 
inventory,  as  that  amount  is  not  an  allowance  on  price,  but  premium  on 
cash  payment  or  interest  for  the  use  of  funds.  Trade  discounts  are,  of 
course,  always  deducted.     (See  also  '  Cost.')      (D.)  " 

To   List.     "  To  write  in   one   column   several   sets   of  figures  or   description 

and  amounts,  one  below  the  other,  to  be  totaled  or  added." 
Led.  Fol.     "  The  page  or  folio  of  the  ledger  to  which  the  entry  is  posted." 

Note.     "  Used  for  promissory  note  —  or  a  written  promise  to  pay  a  certain 

amount  at  a  future  date." 

To  Open  an  Account  "  write  the  name  of  an  account  in  the  ledger  on  a  page 
in    the    space    so    reserved    and    then    enter    the    transaction    or    post    the 
entry.      (P.)  " 
An  Open  Account.     "An  account  showing  a  balance.     (P.)  " 
On  Open  Account.     "  Goods  sold  to  be  paid  for  later  and  the  account  not 
closed  by  note  or  other  credit.     (P.)  " 

Per  Cent.     "  Percentage  from   the   Latin   phrase  '  per  centum,'   meaning  by 

or    for    each    hundred    or    the    proportion    in    a    hundred    and    written    %. 

5%  loss  means  that  5  parts  in  every  hundred  parts  are  lost,  and  95%  or 

95  parts,  the  remainder  of  each  hundred,  are  not  lost." 
Post.     "  To   write    in   a    book,    usually   the    ledger,   the    date,   description    in 

brief,  the  number  of  the  page  of  the  book  from  which  these  facts  are  taken 

and  the  amount  so  carried  or  transferred." 
Posting  Column.     "  The  column  or  space  set  apart  in  all  books  of  account 

in  which  the  page  number  of  the  book  to  which  you  post  the  entry  or 

from  which  it  is  brought." 
Price  Mark.     "  See  '  Cost  Mark.'  " 
Profit.     "  Gross  profit  is  the  difference  of  amounts  paid  for  goods  and   the 

Selling  price. 

Net  profit  is  what  is  left  after  all  expenses  are  paid.     (P.) 


T>. —  Dicksee-Mbntgomery. 
P. —  Pittman-Porters. 


184  GLOSSARY 

Profit  —  Continued. 

The  Century  Dictionary  says  of  Net  Profit: 

'  What  remains  as  clear  gain  to  any  business  after  deducting  the  capital 
invested  in  the  business,  the  expense  incurred  in  its  management  and 
the  losses  sustained  in  its  operation.' 
Percentage  of  either  profit  or  expense  must  not  be  taken  on  the  cost  of 
goods  laid  down,  but  upon  the  amount  of  sales,  because  your  investment 
has  been  not  only  the  amount  paid  the  manufacturer  or  jobber  for  the 
goods  plus  the  freight,  but  you  have  also  paid  a  large  amount  for  carrying 
on  the  business.  You  must  remember,  therefore,  that  your  investment 
is  the  invoice  cost  together  with  the  freight  and  a  proportion  of  all  other 
expenses.     (P.)  " 

Profit,  continued. 

"  The  proper  basis  of  figuring  is  upon  the  total  sales  as  shown  by  the  Trial 
Balance,  before  closing,  as  it  is  upon  that  the  total  profit  is  made,  this 
being  the  case  it  is  the  amount  of  the  sales  that  should  be  taken  as  the 
basis  on  which  all  profits  and  expenses  are  computed  in  making  prices. 
The  common  error  in  marking  goods  is  made  by  adding  a  certain  percentage 
based  on  invoice  price  instead  of  the  real  cost,  which  is  cost  laid  down 
plus  expense. 

Many  merchants  make  this  error,  and  though  firmly  believing  that  they 
are  making  a  handsome  profit,  really  incur  a  loss.  All  expense  must 
be  paid  and  true  profit  only  is  what  remains  after  all  expenses  have  been 
repaid.     (D.) " 

Quick  Assets  or  Current  Assets.  "  Cash  and  those  assets  acquired  for  the 
purpose  of  sale  and  subsequent  conversion  into  cash.    (See  Assets.)    (P.)  " 

Rule  up  an  Account.  "  Put  in  the  balance,  if  any,  under  the  side  which 
sh<  iws  the  smaller  total ;  rule  red  lines,  opposite  each  other,  under  both 
sides  of  the  account ;  then  foot  the  two  sides,  bringing  down  the  totals  in 
ink;  rule  red  lines  under  these  totals  and  bring  down  the  balance.  (See 
Balance.)     (P.) " 

Returned  Goods.  "  Goods  or  merchandise  bought  by  a  customer  and  for 
some  reason  returned  to  the  concern  from  which  it  was  bought.  In  such 
cases,  either  cash  is  returned  the  customer  for  amount  of  goods  so 
returned,  or  a  credit  memorandum  is  given  him,  to  apply  as  a  credit  on 
his  account." 

Stock.  "  Used  for  stock  of  goods  bought  and  to  be  used  for  sales,  formerly 
termed  Merchandise.  Stock,  in  Department  Stores,  is  separated  by  class 
into  departments  thus: 

A  Stock  may  be  Groceries. 

B  Stock  may  be  Dry  Goods,  or  departments  being  numbered,  1  may  be 
Groceries;  2,  Dry  Goods,  etc.,  etc. 


D. —  Dickscc-Montgomery. 
P.—  Pittman-Porters. 


Index 


Acceptance  —  Trade 

Accounts   Payable   

Receivable 

Approving  Orders  

Vouchers 

Bad  Debts  —  Reserve  For  

Balance  Sheet  

Balancing   Cash    

Balancing  Ledger  at  End  of  Year 

Balances  on  Trial  Balance,  Debits  Must  Equal  Credits.. 

Bank  Account  and  Check  Book 

Bank  Discount  on  Loan:  How  Figured 

Barclay,  Geo.  R.     Reason  for  Insuring  Your  Goods.... 

Bills    Payable    

Receivable 

Books  and  Magazines  on  Selling   Management 

Broken  Cases  Not  Counted  on  Stock  Record 

Buying  Goods  Through  Traveling   Salesmen    

"        Checking   and    Noting   Condition 

"        Depending  on  Traveling  Salesmen  to  Re- 
plenish   Stock    

"        Purchase   Order    

Canceled   Note    Preserved    

Canned  Goods  —  Date  Marked  to  Know   How  Old 

Capital  of  Owner  —  Interest  to  be  Paid  on 

Capital   Stock  — -Corporation  Books   

Cash    Balanced  —  How?    

"       Book 

Closed  and  Ruled  for  Month 

"      Footings  Proven    

Considered  as  a  Person,  Mr.  Cash 

"       Drawer  —  Danger  If  Not  Properly  Kept 

"       on   Account   from   Customers 

"       on  Hand    for   Change 

Paid    Out — How    Entered    

"       Petty,   How   to  Account   for 

"       Posted  — Total   for  the   Month    

"       Received  —  How    Entered    

"       Sales 

Check  Book  —  How  L'sed  and  Reconciled  with  Bank.... 
Check  Number  to  be  Put  on  Voucher  Whioh  It  Pays.... 

Checking  Condition  and  Count  of  Goods  Received 

Claims  for  Errors  or  Shortage  on  Goods  Bought 

Closing  Books   for  the  Month 

"      "    Year 

"        Consignment    Account    

Discount  Account  for  the  Month 

"        Discount  Account  for  the  Year 

Closing  Entries  —  Set  No.   1 

(t  tt  it         tt         9 

((  II  If  ((  -7 

Mdse.  a/c     "      "      1.  '.'.'.'.'.'.'.'. ..'.'.'.'.'.'.'.'.'.'.'.'.'.'. 
a  a        a      it      tt      -j 

Collect   Past  Due  Accounts 

Commencing  Business 

Comparative  Sales  Record   

Comparing  Canceled  Checks  with  Bank  Book 

Consigned  Goods  or  Produce  Sent  to  Commission  House 

Consignment  Account  Closed  

Corporation  — Dividend    Declared  —  How    Entered 

Corporations  —  Entries   to  Change   from   Firm   to   Cor- 
poration  

Cost  Book  and  How  to  Keep  for  Cost  and  Selling  Price. 

185 


Forms 

Pages 

54,55 

163 

14,16 

14,16 

22 

110 

48,87 

50 

40 

32,  68.  72,  84 

32, 103 

32 

52 

146 

57 

161 

55 

74,85,115,166 

73 

106,176 

166 

18 

69 

5,18 

11,25, 7'0 

170 

18 

69 

115 

173 

87,  103 

60 

149 

32.  68,  72,  84 

21, 22, 32,  33 

18, 83, 85, 126 

30,  83, 85, 126, 136 

85 

18 

11,17 

15 

29 

19,72 

40 

72 

32, 127 

18 

3  A 

12,17,23,126 

52 

146 

61 A 

112 

5,18 

11,25,70 

5 

25,70 

30, 33, 136 

39,  65, 86. 138 

86,88 

84 

88 

10 

41,46 

28 

83,  86, 98 

43 

138 

41,46 

65 

68 

24,64 

16 

66 

52 

146 

73 

86 

153 

58,  59.  60 

149 

57 

172 

186 


INDEX 


Forms 


l  Goods  Used  for  Saks  —  Mow  to  Figure 

or  Market    Price   Whichever  is   Lower-pricing   In- 

ventory 

Count  and  Condition  of  Goods  Received  to  he  Xoted  on 

Invoices 

Cndit  Balances  Should   Equal   Debit  Balances  on   Trial 

Balance 

Explained  —  A    Debil   Musi   Have  a  Credit 

Memorandum   and    It*   Uses 

Cross  Entries  —  \\  hat   Arc  They  ?    

Customers'  Accounts 

I  'art     I  'ayment     on 

Dates  Notes  are  Due  to  be  Entered  on  Diary 

Debit  What   Is  Received-     I  r<  .lit  What  Is  Paid  Out 

Deduction  of  Discount  or  Claim  from  Voucher 

Department   Books  —  What    Are   They?    

Decided   on    

Expenses 

Goods  on   Hills— How  to  .Separate 

Inventor] 

Sales 

"Stock"  instead  of  "Merchandise  Acct."... 

Deposit  All  Receipts  and  Pay  All  Bills  by  (.'heck 

Depreciation 

i  hi   Furniture,  Dray  Stock,  etc 

Diary    and    Its    Uses 

of  Daily  Transactions,  Set  2 

"     3 

Discount  Account  closed 

Gain   But   Xot   Trading   Profit 

i  mi   Vouchers   Paid  —  I  low    Entered 

"        Paid  on  Loans  from  Bank — Haw  Figured  and 

Entered 

"         Received   for   Month   Posted    in   One   Total 

Disputes  on   Purchases    

Dividends  —  What  Are  They  ?   

of   Corporation- — Mow    Declared   and   Entries. 

Dividing   Profits  for   Year 

Draft   for   Acceptance    

Drawing    Money   for  Self 

Due   Date  of    .Votes   Watched 

Date!    oi     Invoice-    Watched 

Duties  of   Partners  and  Clerks 

Each   Clerk'-.   Sales    Kept  Separate 

Easy  Separatioti  of  Goods  on   Bill  by  Departments 

Entering   and    Posting    

Errors  on   Invoices  of  Goods   Bought,   Xoted 

Estimating-  Stock  on  Hand  at   Any  Time 

Expense  Account  Closed  for  the  Year 

"         into    Trading    Account    

by  Departments 

"         Charges 

"        Percentage  of   Sales   

Expiration  of  Fire  Insurance   Watched 

Explanation  of  Terms  Used  by  Bookkeepers 

Extending   Figures  on   Inventory 

Figuring  Profits  — Right  Way   and   Wrong  Way 

Filing  Invoices  After  Goods  Are  Received  and  Vouched. 

Filling   and    Shipping   Orders 

Financial    Statements  —  Reciprocal    Value    of 

Requested  and   Dow  to  Prepare.. 

"  "  Sometimes  Guess  Work    

Fire   Insurance  —  Expirations   Watched    

"  "  Reason    for    Insuring    

"  "  Leaflet  of   Xat'I  Ass'n  of  Credit  Men. 

Forms  or  Figures  —  1   to  60  List 

Freight    Paid   and    Entered 

Full  Cases,  Only,  Counted  on  Stock  Record 

Furniture — -Depreciation    on    

"  on  Inventory,  How  to  Identify  Xext  Year.. 

General    Accounts — What   They    Are 

General   Expense   Apportioned  to  Department 


17 


46 
36 

36 


23 


54.  55 


37 
36 

5,18 


53 


Pages 

58 

55 

11,25,70 

3i 

10,  18,33,45 

69 

42 

28,  OS.  116 

15.  21. 29 

71 

10.45 

,115,  l"> 


111. 


108,  111: 


107 
107 
lio 

113.128 
108 

113. 129 

107 

71.146 

55,  87 

71 

76.82 

117.  124 

84, 88 

88 

112 

57 

84 

25,  70 

57.  153 

153 

103,139 

103 

12,28 

73 

71 

67 

113 

113.128 

22,24.103 

25,  70 

04 

41.43 

88,104 

62, 106, 136 

29,  37 

58 

71 

179 

53 

58 

110 

OS 

156,  157 

156 

157 

71 

161 

160 

185 

12,  20 

166 

55.  87 

55 

42 

136,62,105,108 


INDEX  187 

Forms  Pages 

Glossary  or  Explanation  of   Bookkeeping  Terms 179 

Goods   Bought  Through  Traveling  Salesmen 70 

Received  —  Stamp   for    Noting   Count,   Condition, 

etc 5  11,25,70 

"       Returned 69 

"      Shipped   to   Commission    Houses 73 

Gross  and  Net   Profit 65,104 

'          "       Percentage    of    65,  104 

House  I  ost  ami  Price  Book 57  172 

Ignorance  of   Stock   on    I  land   Costly 17-4 

Index  to  Forms  or  Figs.  1  to  60 185 

Indexing  Inventory  53 

Ledger 16,  26 

Insurance 86.  160 

Interest  —  How  Charged  and    Posted 80 

on   Proprietor's   Capital    87 

Inventory — Advantages    of    54 

"  Assigning    Space    to    each    Team    of    Caller 

and    Lister    51 

Can  Often   Be  Taken  in  One  Day 49 

Extensions   Checked    53 

How   to  Take    14  52 

Identifying  Furniture  or  Machinery  on....  55 

Indexed 54 

Location  of  Goods  Xoted  on  Each  Sheet...  52 

Prepare   for    51 

Pricing  at  What  Cost?   49,55 

Quickly  Taken  by  Team   Work 51 

Sheets  to  be  Initialed  by  Takers 53 

"               Stock  by   Departments   52 

Taken  by  Teams    51 

What   It  "Is  and  What  It  Shows 48 

Invoices  —  Due  Dates  Watched   71 

Entered  on  Journal    26 

"     Voucher   Record    110,111 

Goods  Checked  as  Received 5,  18  11,  25,  70 

of   Goods   Bought  —  Filing    110 

to  be  Promptly  Paid  When  Due 71),  164 

Journal  Described  and  Its  Uses 7,  10.  34,  43  19,  63, 129.  140 

Ledger  —  Arranging  Space   in    16,  29 

Described  and  How  to  Post 24,  25, 26, 41,  44  15,  132 

"            Indexing 16, 26 

Opening  an   Account   in 16 

Ruled  at   End  of  Year 32.103 

Machinery  Marked   for   Inventory   Identification 55 

Making  Claims   for  Shortage  or  Errors 25,70 

Management,  Buying  and  Selling.     See  Books  and  Trade 

Papers 176 

Marking  Furniture  for  Inventory   Identification 55 

Maturity  or  Due  Date  of  Invoices  Watched 71 

Memo    of  Daily  Transactions  on  Set  No.  2 76-82 

"       "               "             "       "     "     3 117-124 

Mercantile   Agencies    159 

Mdse.  as  Person  Mr.  Merchandise 44 

"       Bought  for  Cash  Posted  in  One  Total  at  End  of 

Month 22 

"       By  Department  Called  Stock  107 

"       Charged  to  Stock  Account   __         107 

"      Closed  into  Trading  Account   65, 88,  138 

"      Closing   Set    No.    1 41,44.46 

•'      2 .  88,138 

"       Condition   of   Noted   When   Received 5  11,25,  70 

"      Given   Back  to  Inventory 13  43.139 

"      Not  Credited  with   Sales 40, 45 

"      on  Hand  at  Any  Time — -How  to  Estimate 64 

"      or  Stock  Account   Charged  with  Freight 12,26.27 

Returned 17  69 

"       Used  for  Sales  —  To  F'igure  Cost  or  Amount  of..  58.65.104 

Miscellaneous  Expense  Divided  Between   Departments...  108,136 

Money  for  Change  in  Drawer 29 

Personal    Account  —  How   Entered    28 


hSN 


INDEX 


Monthly  Sales  for  Comparison 

Posted  as   one   Total 

"        Statements  Always   Written    Up 

National  Association  of  Credit  Men  Leaflets 

Neatness  —  Advantages   of    

Needed  Goods  Left  to  Judgment  of  Traveling  Salesmen. 

Nfi  i  r i-  

No  Debit  Without  a  Credit  and  Vice  Versa 

Notation  on  Invoices  as  to  Correctness 

Notes  Due  —  Date  Watched    

Given  or  Received  to  he  Serially  Numbered 

"       Given    You    by    Your    Customers 

to  be  Promptly  Paid  When  Due 

O.  K.  Stamp  for  Invoices  When  Goods  Are   Received... 

Open   an    Account  —  How    to 

Cash   Drawer    Dangerous    

Order  Blanks — Hovi    Filled   Up 

Orders  to  be  Appro\  ed  

Ordering   Goods    for   Stock 

Original   Game  of   Debit   and   Credit 

Overlooking  Due   Dates  of   Invoices  Can    Be  Avoided.... 

Owner  to  Receiver  Interest  on   His  Capital! 

Part   Payment  of  an   Account   by   Customer 

Partnership  Agreement  of  Bell  &   Davis 

Past    I'll'  innts    

Pay    Roll  — Putting    Up    

Percentage  —  How   to   Figure  and   Examples 

What  It  Is  

of  Expense  and  Profits  on   Sales 

Perishable  Goods  Watched   

('ash  and  How  to  Keep  It  Correctly 

Posting 

Totals   at   End  of   Month 

Price  and  Cost  Book  —  Advantage  Of  and  How  to  Enter 

"       ' Noting   Changes    

Prices  —  How  to  Figure   Selling  Price 

Pricing    Inventory    

Produce   Shipped   to   Commission    Hhum- 

Profit  and  Loss  —  Set  1 

1*  11  t(  tt         O 

3'.".'.'.'.'.".".!!".'.'..'.'.'.".!!'.'.!!'.!'.!!!'.! 

Profits  Divided  at  End  of  Year 

"       Figured  on  Sales  Not  Cost  of  G I- 

'    and    Wrong   Way 

"        Gross   and    Net    

"        Other  Than   Trading  Profits 

"        Other   Than   Trading    

"       Not  Uniform   on    Ml   Goods 

Prompt    Payment   of   Bills 

Proprietor  to  Receive  Interest  on   His  Capital 

Protect  Yourself  and  Your  Creditors  by  Fire  Insurance. 

Proving   "Vouchers    Audited"    Account   

Purchase   Orders    

Purchases   Kepi   Separate   from  Sales 

Jul;"  and  Checkin  ■   G Is 

Reconciling  Check   Book  with  Bank 

Relative  Percentagi    on  Cost  and  on  Selling   Price 

Remittance  by  Voucher  Needs  no  Letter  to  Accompany  it 
Representative    \ccounts    

:      \';\t\     1  )i  Ills     

Return  I    Goods    

Right  i '  

Rough  Notes  of  transactions    -Set   1 

••  ■■      > 

••  u   3.! .'.'.'!. '..'!.' . 

Ruling  l>  and  Closing  Cash   Book  for  Month 

"        Sales    Book    

Ledgei 

Sales  —  What  Goes  Into  a  Sale 

"        Hi. ok  — Set   No.   1 


Forms 

Pages 

66,114 

32 

68 

156, 160. 161 

176 

170 

65, 104 

10,45 

5 

11.25,70 

73 

73 

73 

74 

5,18 

11,25.70 

16,24 

17 

3B 

22,  68 

18 

70 

10 

71 

87, 103 

1? 

67 

69 

39 

71 

58, 105 

56 

104 

173 

40 

72 

16,22.24.103 

22,32,127 

57 

172 

172 

56.  58, 105 

40.  55 

73 

47 

103 

43 

139 

103 

57 

56, 58, 105 

104 

86 

86 

106 

70.74 

87, 103 

161 

111 

70 

18 

22 

5 

11.25.70 

52 

146 

15 

61 

51 

112 

42.62 

48.87 

17 

69 

58,  105 

10.24 

117.124 

6 

30. 83 

4,23,35 

21,63,128 

32. 103 

40.  :-•> 

4 

21 

INDEX 


189 


Sales  Book  —  Set  No  2 

3 

"      — ■  How  to  Enter  t 

"       by  Departments   

by  Months    

"      —Cash   Sales 

"       Closed  into  Trading  Account 

"       Closing  at  End  of  Year 

"      Not  Posted  to  Mdse.  Account 

"       of   Each   Clerk  Kept   Separate 

"      on  Time  or  Charge  Sales 

"      Tickets 

"       to  be  Approved  Before  Filing 

"      Total  Posted  at  End  of  Month 

Total  Posted  at  End  of  Month 

Set  of  Books  No.  1  —  John  Wilson    

"      2— Roht.  Bell  &  Co 

"      "        "        "      3  —  Bell  &  Davis  

Selling  and  Buying  in  Trade  Papers  and  Books 

Selling  Price  —  How  to  Figure 

Separating  Department  Goods  on  Sale  Tickets 

Shortage  or  Errors  on  Goods 

Slow  Sellers  or  "  Stichers  "  Caught 

Spoiled  Goods  —  To  Guard  Against  Stock  of 

Starting   Business    

Statement  of  Your  Own  Affairs  —  How  to  Make 

Sometimes   Guess   Work    

to  Customers  Always  Ready 

to   Mercantile   Agencies    

Stock  —  A  Term  Used  for  Merchandise 

Inventoried  by   Departments    

on  Hand  —  How  to  Estimate    

Record 

Running  Low  —  How   Watched    

Store  Keeping  Books  and  Trade  Papers  Valuable 

Strangers  Get  No  Credit  Without  Satisfactory  Reference 

Sundries   Column   Cash   Book  Explained 

Taxes  —  How   Entered    

Total  Posted  at  End  of  Month 

Tracing   Paid  Vouchers    

Trade   Acceptance   

Trade  Journals  —  Advantages   of    

Trading  Accounts  —  What  Is  It  ?   

"  Closing   Set   2 

"     3 

Entries 

Proved   Another   Way    

Profit  — What  Is  It?    

Trial   Balance  —  How  to   Take  Off 

Set    No.    1 

"  "  "      »       2 

"    "    3.".'.'.'.'.'!.'!.'.'.".'.'!!!!.'!!!'.!!!!! 

Traveling    Salesmen's    Judgment    of    Your    Needs    Must 

Not  Be  Depended  On   

Voucher   System    

and  How  to  Make  Up 

"         Made   to   Bear   Check   Number  with   Which   It 

Is  Paid   

Number  on  All  Invoices  Vouched 

Record  and  How  to  Use  Distributing  Columns, 

etc 

"         with  Discount  Deducted  —  How  to   Enter 

"  Audited  Totals  Posted  at  End  of  Month   from 

Cash    Book    

Traced 

Vouchers  as  Paid  Are  Noted  on  Voucher  Record 

Wages  Distributed  to  Departments   

Want  Book  and  When  and  How  to  Use  It  to  Advantage. 

"         "      to  Watch  Stock  Running  Low 

Watching  Due  Date  of  Invoice  to  be  Paid 

What  a  Sale  Is  Composed  Of 

Wrong  and  Right  Way  to  Figure  Selling  Price 


Forms 

Pages 

23 

63 

35,36 

113,128 

68 

36 

113, 128 

16 

66,114 

12,17 

28,43 

88,137 

41,88,137 

11,22 

37 

113,  129 

3A 

12,68 

3A 

17,20 

22 

22,32 

23,32 

21 

63,75 

107 

106, 176 

56.  58, 105 

113,128 

5,  IS 

25,70 

54 

173 

24,64 

S3 

156 

157 

68 

159 

107 

108 

64 

,A,56B 

158,171 

56B 

170,174 

106, 176 

155 

25 

86 

22,32 

113 

54,55 

163 

106, 176 

29 

88. 138 

88,104 

46 

138, 144 

88 

104 

88 

32 

1,9 

14,32 

27 

8S.98 

31,42 

125, 135 

170 

38,51 

109, 130 

110 

111 

110 

111.131 

111,115,166 

33 

127 

113 

112 

39 

108, 135 

174 

174 

71 

46,  59 

58 

"**nr  o*.  oat.t,    •- 

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